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Federal Reserve may hike the rate, RBI may not

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Published on 17 May 2016 9:55 AM GMT

Federal Reserve may hike the rate, RBI may not
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New Delhi: The Federal Reserve may hike the rate, as is being speculated in view of the improvement in overall economic situation in the USA, but it is likely to remain unchanged in our country because of the rise in wholesale and retail price index last month.

The Reserve Bank of India (RBI) is scheduled to meet next month to review the situation and decide the rate in the light of the inflationary trend

Retail prices of some commodities like pulses and sugar had registered rise of as much 35 per cent. The wholesale prices rose to a level unmarked in last one and a half years, on an annual basis. What is more surprising is that potato prices have also gone up.

The RBI has, on more than one occasion, announced that price situation was a major consideration while deciding the rates. The forecast of a good monsoon, however, may be also factored in. The bank may also keep in mind the clamour of a rate cut by some politicians including the Bhartiya Janta Party Member of Parliament Subramaniam Swami .

Swami who has been in the news recently for attack on Congress president Sonia Gandhi in connection with AgustaWestland helicopter deal has even gone to the extent of demanding change of RBI governor who has not favoured rate cut in inflationary conditions. The first term of present governor Raghuram Rajan ends in September.

Looking back it appears that, besides monsoon, the Centre’s policy is responsible for rise in prices of some commodities including pulses. Production of pulses last year was much lower than the demand for it. The shortfall was anticipated much before crop was harvested. But the central government did not take any action. It decided to import some varieties of pulses only when there was much hue and cry against the rise in their prices. Taking no lesson from the past it has not imported sufficient quantity of pulses this year too, leading to further rise in prices. May be it is too busy with Sonia in particular and the Congress in general to pay its attention to these areas.

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