RBI is expected to continue tightening its monetary policy, ignoring cues from the central banks of Australia and Indonesia that left interest rates unchanged, economists and analysts said.
Bank Indonesia kept its reference rate at 6.5% amid slowing inflation while Reserve Bank of Australia also left its benchmark interest rate unchanged at 4.5% on Tuesday.
?Even though policy actions taken by Australia are watched closely, the domestic growth story remains important (for monetary policy),? said Anubhuti Sahay, economist, Standard Chartered Bank. India?s economy is expected to grow by 8.5% in the fiscal year ending March 31 while the Australian economy is forecast to grow by 3.5% in 2010.
The Reserve Bank of Australia was among the first central bank in the region to tighten monetary policy. Indonesian economy is expected to 6.1% this year and 6.3% in 2011.
The Australian central bank has kept its key interest rates unchanged for a fifth straight month after 150 bps of hikes while Indonesian central bank has left policy rates unchanged for 15th consecutive month. Economists said high inflation and domestic demand-led growth makes it difficult for RBI to have a loose policy unlike other Asian economies, which are dependent on exports.
