Premature to talk about rate hikes, India cenbank chief tells ET Now

MUMBAI, June 24 (Reuters) – India’s central bank chief said on Wednesday it was “premature” to talk about interest rate hikes at this stage of the policy cycle.

Speaking to television channel ET NOW, Sanjay Malhotra said the central bank was watching for second round effects of higher oil prices on inflation in the broader economy before taking a call on rates.

“We do not see signs of inflation generalizing yet,” Malhotra said.

The Reserve Bank of India’s monetary policy committee kept interest rates unchanged at its meeting earlier this month, while maintaining the stance at “neutral”.

Here are some of the key comments from the interview:

• “If we wanted to prepare the market for rate hikes, we would have changed stance from neutral to restrictive,” Malhotra said.

• MPC to take a call on rates “meeting by meeting” – Malhotra

• Currency, external uncertainty is what we are all concerned about. De-escalation in the West Asia is a big positive.

• Initial response to steps taken to support the rupee has been “good”. RBI expects “healthy flows”.

• Movement in forex markets has been orderly since steps taken to curb speculation.

• It will be good if Indian bonds are included in Bloomberg or any other index.

• Ease of investing measures are in the pipeline, Malhotra said.

• RBI’s foreign exchange reserves currently offer adequate comfort, Malhotra said, noting that reserve strategy is built around principles of safety, liquidity and returns.

• Gold holdings as part of the FX reserves are aimed at safety and liquidity as needed, the central bank chief said.