Policy rate season

While Reserve Bank of India has increased the policy rates for the eighth time in a year, globally, most central banks are also increasing their policy rates as the economy shows signs of revival.

Written by Saikat Neogi

March 23, 2011 02:13 IST

While Reserve Bank of India (RBI) has increased the policy rates for the eighth time in a year, globally, most central banks are also increasing their policy rates as the economy shows signs of revival. And with inflation rates rising fast in most Asia countries, driven mainly by global food and crude prices, central banks in this region will have a challenging time ahead to use monetary policy to contain inflation and stabilise the real rates. After the collapse of Lehman Brothers in September 2008, the central bank of Vietnam increased its policy rates by a sharp 500 basis points (bps) till March this year, which is the highest amongst all central banks in the world.

The central bank of Brazil has increased the policy rate by about 300 bps and RBI increased its repo rate by 200 bps from 4.75% pre-September 2008 to 6.75% in March this year. In contrast, the central bank of Russia increased its policy rates by only 25 bps and the central bank of China hiked its policy rates by 75 bps.

This article was first uploaded on March twenty-three, twenty eleven, at thirteen minutes past two in the night.