RBI keeps watch on inflation, liquidity

Reserve Bank of India said on Thursday it is looking at liquidity, inflation and credit growth to see if it will have to take more steps to tighten monetary conditions.

"Everything depends on evolving circumstances... have to look at inflation, liquidity and credit growth," RBI Deputy Governor Rakesh Mohan said when asked whether the central bank will put a pause on monetary tightening.

Last week, RBI had incresed the cash reserve ratio, the percentage of deposits that banks must park with it, to absorb Rs 13,500 crore (Rs 135 billion) from the economy as part of measures to check rising prices and sustain the growth momentum.

Though RBI also takes

note of international developments, there was no direct link between moves by US Fed and domestic interest rates, Mohan said on the sidelines of an ICRIER conference in New Delhi.

Federal Reserve, the US central bank, had recently decided to keep interest rates unchanged for the fourth straight time, saying economic growth in the US had weakened, propelled by a 'substantial' slowdown in the housing market. At its final meeting of 2006, the US central bank left its target for the federal funds rate at 5.25 per cent.

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