New Delhi: To be fuelled by the over 6 per cent inflation rate in the next three months and "hesitant" monetary steps by RBI, the interest rates are likely to harden further, predicts the Institute of Economic Growth (IEG), an economic think tank.
"The wholesale price-based inflation for the next three months to be around 6.5, 6.4, 6.3 per cent mark," as quoted by PTI, IEG said in its latest monthly monitor.
As inflationary expectations still persist in the economy, the interest rate could go up further. Prime lending rates would harden in the coming months, it said.
Interest rates cycle is yet to peak in the economy, it said adding, the PLR of five major commercial banks have recently gone up to 11.5-12 per cent.
However, it said, following tight monetary stance of the Reserve Bank, there is a slight decline in the growth of the credit which is currently at 26.9 per cent against 27.9 per cent last year.
"Although the RBI has undertaken tight monetary policy in a gradual manner, which led to current rise in overall interest rate structure, we feel that these moves are rather hesitant," IEG said.
In other words, the current high inflation rate could be attributed to the hesitant monetary policy that RBI had adopted since early 2006.
This must have led to over expectations and could have been one of the reasons for so-called 'over-heating', it added.
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