All eyes are on Raghuram Rajan, the new Reserve Bank governor, as he prepares for his first monetary policy statement this Friday. While it is difficult to predict what he will do, the market would like him to reverse July's liquidity tightening measures because it isn't helping in taming the unwieldy current account deficit, driven by gold, oil andcoal imports.
Demand for these commodities cannot be curbed through interest rates. Though a lot depends on the much-feared US Federal Reserve's move, expected on Wednesday, to taper its bond buying programme, the markets would like some clarity on which way interest rates are headed. It is becoming clear the rupee's 28 per cent fall between April 30 and August 28 was largely caused by a crisis of confidence, triggered by foreigners' selling in the bond markets.
Demand for these commodities cannot be curbed through interest rates. Though a lot depends on the much-feared US Federal Reserve's move, expected on Wednesday, to taper its bond buying programme, the markets would like some clarity on which way interest rates are headed. It is becoming clear the rupee's 28 per cent fall between April 30 and August 28 was largely caused by a crisis of confidence, triggered by foreigners' selling in the bond markets.
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