Reserve Bank of India (RBI) Governor Raghuram Rajan on Wednesday said any change in benchmark interest rate in its next month's monetary policy review will depend upon the price situation and other macro-economic factors such as currency.
"We will watch the incoming data carefully, especially looking for the effects of the harvest on food prices as well as the second round effects of fuel price increases and exchange rate depreciation, before we make further decisions on interest rates," he said.
The RBI, which raised the key policy, or repo, rate by 0.25 per cent twice in the recent past to check inflation, is scheduled to come out with mid-quarter monetary policy review on December 18.
"Markets are worried about what these (economic) data mean for policy rates. As I have said before, the RBI is concerned about the weak economy as well as high inflation," Mr Rajan said.
"We believe the weak economy, increases in food supply, and recent policy rate hikes will provide a disinflationary impetus over time, and recent data do not dispel this view."
He said it is important for RBI to clarify its interpretation of economic events and the likely direction of policies at times of uncertainty "so that the market worries about the right things and does not get into a tizzy about the wrong ones".
As per government data, the industrial output grew by a meagre 2 per cent in September, while retail inflation has entered in double digit with October figure at 10.09 per cent. (Read more)
The rupee, which recovered after touching lifetime low of 68.85 to the US dollar on August 28, has against started declining. On Wednesday, it closed at 63.30 against the dollar.
The economic growth has slowed down to 4-year low of 4.4 per cent in the first quarter of the fiscal year, raising the demand for rate cut to boost growth.
Second quarter GDP data is slated to be released on November 29.
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