RBI: Keeping OMO Option Open to Infuse Liquidity

Tuesday, January 31, 2012
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Chennai: The Reserve Bank (RBI) is keeping the Open Market Operations (OMO) option open to address the pressure on liquidity, a senior bank official said. "It is really the first market day after CRR (Cash Reserve Ratio) cuts. So we will have to observe the response over the period of time. But, as we have said, in the past policy interactions that if we need to address liquidity for the OMOs, we are open to that," Subir Gokarn, RBI Deputy Governor, told reporters here. "If there is a persistent shortage after this (CRR cuts), we are certainly keeping the OMO option open," he said after delivering a lecture at the Madras School of Economics. On the interest rates especially in the present inflation pattern, he said, "There is no short term fix. It very tempting to say. Lower interest rate to stimulate growth. But if the consequence of that is the spike in inflation in few months down the road, then it has really not accomplished anything." He further said, "We need to look at inflation management not for a month or two, but on a sustained basis, it has to come down and stay down at least below certain thresholds for some period of time for it to start impacting positively on investment behaviour in particular."
Source: PTI
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