RBI for More Open Market Operations

RBI for More Open Market Operations

By SiliconIndia   |   Tuesday, 31 January 2012, 03:36 Hrs
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Chennai: India's central bank, RBI, is open to more open market operations to address the issue of liquidity, said a senior official.

"We are open to more open market operations if the liquidity issue needs to be addressed. The cut in CRR (Cash Reserve Ratio) is purely a liquidity measure. It has put in 32,000 crore," Subir Gokarn, Deputy Governor of Reserve Bank of India (RBI) told reporters here. He was here to deliver the 5th Sage-MSE Endowment lecture on 'India's Non-Inflationary Rate of Growth' at the Madras School of Economics.

According to Gokarn, there is no quick fix solution to curb inflation and inflation management should not be looked as one or two months issue but on a sustained manner. He said inflation level has to be below a certain level so as to have a positive investment activity. According to him, there is no need to further tighten the interest rates and that is the reason why the CRR was cut recently.

Gokarn said there is a strong demand pressure on prices of protein products like milk, meat and eggs as people are changing their dietary habits and added that programmes like National Mission for Protein Supplements has to deliver in productivity to pull down the food inflation. According to him, RBI believes that 4.5 percent inflation is a strategic goal and reaching to this level is subject to various risks but the move should be in that direction. The interest rate cuts in the future would depend on the dynamics of inflation and growth.

On the rupee hardening of rupee after a fall Gokarn attributed that to two reasons - the measures taken by RBI in last November and December that had a stabilizing effect and the flowing in of capital into India from emerging markets owing to increased liquidity in the global markets.

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