RBI expects medium-term interest rates to remain low

Mumbai: The Reserve Bank of India (RBI) would lay emphasis on price stability and interest rates are likely to remain low in the medium term, Rakesh Mohan, deputy governor of the Reserve Bank of India, said.

Speaking at a conference on 'Cash, treasury and risk management in India', he said interest rates are more likely to fall in the medium term if the transaction and intermediary costs fall.

"Interest rates are market determined. Our effort clearly is to administer the system so that we have price stability. With greater stability it is possible to have lower interest rates in the medium term," he said.

There is no change in the RBI's stance on inflation for the fiscal year that ends in March 2007, he said. "Again, really there is no material change since our October 31 mid-term review," he added.

"Our aim is to bring inflation down over a period of time", he said, adding "We don't target inflation. Given that international inflation is around 2-3 per cent, and ours is around 4-5 per cent, we have to constantly strive to bring it down."

The RBI, he said, aims to maintain price and financial stability despite the uncertainty about global oil prices. "We have said in the mid-term review, the high level of oil prices continues, which it does. The uncertainty remains."

Asked whether an increase in consumer price inflation was a concern, Mohan said the RBI monitored all inflation indicators.