Dashing any hope of a rate cut in his upcoming policy review on July 30, a bookish RBI governor D Subbarao said he will assess growth, inflation and the external situation before taking a view, while still according priority to controlling "high" inflation. He said he would assess growth, inflation and the external situation while taking a view on July 30. The central bank will accord priority to controlling inflation, which still remains "high," Subbarao said, adding the rupee fall over the last 10 weeks has been because of global factors…It is difficult to say how long that effect will persist because it is factors beyond our control." The rupee has declined by over 12 per cent in the past three months and had touched a record low of 61.21 to the dollar on July 8. The currency recovered after the RBI and Sebi announced measures to curb volatility and speculation in the currency derivative market.
The rupee, which climbed to a one-week high today, wiped out the day's gains and weakened by 2 paise to 59.67 at the close on fresh demand for dollars from importers. The RBI's efforts to contain inflation have yielded fruit, with the wholesale price index declining to 4.7 percent, the lowest in over three years. However, retail inflation stood at 9.31 per cent in May. The current account deficit remains high, Subbarao said. The CAD hit a record high of 4.8 per cent in the last fiscal. In view of the declining value of the rupee, fears of inflation and the high CAD, the RBI left interest rates unchanged during the last policy review on June 17.
The apex bank would look at supporting growth but would make efforts to keep inflation low. The outflow of foreign funds to the tune of $7 billion in June alone, following concerns about the tapering of bond purchases by the US government, has put pressure on the rupee.
