Off-cycle rate hike unlikely, says RBI deputy governor

Written by Reuters | Mumbai | Updated: Jun 30 2010, 03:41am hrs
The probability of an interest rate hike before the Reserve Bank of Indias (RBI) July 27 monetary policy review is very low, a deputy governor said on Monday.

KC Chakrabartys comments follow Fridays move by the government to free-up petrol prices and raise prices of state-subsidised diesel, kerosene and cooking gas, which is expected to add to inflation. Possibility is there ... but whether it will happen or not I dont know. We will continue to monitor this ... but probability of rate action before policy is very low, he said, adding that the RBI was monitoring global developments.

Chakrabarty, who is not directly involved in monetary policy setting, said earlier that interest rates can be raised at any time.

Interest rates can be hiked anytime. Before the policy, at the policy or after the policy, Chakrabarty said, adding he expects inflation to come down over a period of time.

The yield on the 10-year bond rose 2 basis points after his comment that rate hikes can come at any time but later dropped 3 basis points to 7.59% after he said that the probability of a rate hike before the policy review was low.

Chakrabarty, who is one of four RBI deputy governors, also said that he expects inflation, which was in double digits in May, to come down over a period of time.

The RBI is widely expected to increase interest rates at its July 27 policy review. It raised rates by 25 basis points in March and again in April.