Chidambaram rules out need to raise rates

Finance Minister P Chidambaram Sunday said the Reserve Bank of India may not need to raise interest rates further to curb inflationary expectation.

"There is ample liquidity. The US Fed has not raised rates. What I have said is that it should be possible to dampen inflationary expectations at the current interest rate level," Chidambaram told reporters, on the sidelines of a two-day conclave of chief ministers of Congress-ruled states.

He, however, said one had to wait and see what RBI will do in the mid-term review of the annual policy October-end.

"What RBI will do we will have to wait and see," he said.

The RBI has already raised short-term benchmark rates by 50 basis points to curb inflationary expectations since the beginning of the current financial year in April.

Chidambaram also said the government's market borrowing during October-March, the second half of 2006-07, would be in line with budget estimates.

"It should be the same," Chidambaram said, when asked about the size of the government's borrowing plan. The government is likely to announce the borrowing schedule for the second half of the current financial year.

As per the budget estimates, the government will borrow Rs 639 billion in the second half of the current financial year.

The budget has projected a total borrowing of Rs 1.529 trillion through gilts. Of this, the government has borrowed Rs 890 billion in the first half of the financial year.