As per the data released, inflation came down to 10.68% as compared to last week's 11.07%. Primary articles down by 0.3%, fuel, power, light down by 0.4% & WPI for all commodities down 0.2%.
Now RBI seriously needs to think about increasing liquidity in the economy by decreasing key interest rates. Yesterday US FED cut its key interest rate to 1% and China also reduced its rate. Taiwan and Hong Kong followed up with rate cuts on Thursday and there was speculation that Japan could follow soon.
Eight out of 10 economists polled by Reuters after the policy review expect the RBI to cut its key lending rate by 50 to 200 basis points by the end of the fiscal year and lower banks' reserve requirements to support growth.
"The inflation rate has come down much faster than anticipated. I think this will provide a strong case for the RBI to ease lending rates further and support the markets," Anubhuti Sahay, economist at Standard Chartered Bank in Mumbai said.
Indian financial markets were shut on Thursday for a holiday. On Wednesday, overnight lending rates jumped in a cash squeeze and bond yields fell on hopes of more steps to ease liquidity.
Sources...
Moneycontrol
Economic Times
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