Interest rate muddle

Ball in RBI’s court? Finance Ministry believes further RBI intervention is required to tame inflation Officials believe a fresh hike in interest rates may be required Difficult decision for the central bank with economy already slowing down

Rising inflation continues to worry the UPA government. North Block now feels that further fiscal measures are unlikely to stem inflation and the ball is now in the RBI’s court to intervene once again.

The Finance Ministry is believed to have communicated its stance to the central bank. Says a senior official: “We believe RBI might have to increase interest rates again in the future to cool off inflation.”

This, though, puts RBI in a spot given that industrial growth has slowed down noticeably recently. Whether the central bank will tighten the monetary policy further remains to be seen.

—Rishi Joshi