Subbarao Says Hard to Predict When Indian Rupee Will Stem Drop - Bloomberg

India's central bank governor said it's difficult to estimate when the rupee will reverse declines and that inflation remains elevated. "The rupee depreciation over the last six weeks has been because of global factors," Duvvuri Subbarao told reporters in Indore in central India today. "It's difficult to say how long that effect will persist because it's factors beyond our control." He told villagers inflation remains "high" even after easing to some extent and controlling it is the priority. The currency has slumped almost 9 percent versus the dollar in the past three months and touched an all-time low July 8, threatening to stoke import costs and curb the Reserve Bank of India's scope to extend interest-rate cuts. Subbarao said he'll assess growth, inflation and the external situation in his July 30 policy decision. He left borrowing costs unchanged in June. "As long as there is volatility in the markets the Reserve Bank will hold back from cutting interest rates," said Upasna Bhardwaj, an economist at ING Vysya Bank Ltd. in Mumbai. "The depreciation in the rupee will make oil and commodity imports more expensive and that will feed into overall inflation." India's current-account deficit has been "high" and global developments in recent weeks have sparked exchange-rate movements in several emerging nations, including India, Subbarao said. The possibility of reduced U.S. monetary stimulus has buffeted asset prices in emerging markets from Brazil to Indonesia. The rupee weakened 0.2 percent to 59.77 per dollar as of 4:10 p.m. in Mumbai, while the yield on the 8.15 percent note due June 2022 fell to 7.59 percent from 7.65 percent yesterday. The S&P BSE Sensex index of stocks rose 2 percent. The Reserve Bank may impose more curbs on foreign-currency trading by lenders to stem the rupee's slide, according to a person with knowledge of the matter, who asked not to be identified as the information is confidential. Subbarao cut the benchmark repurchase rate by 25 basis points in January, March and May each to 7.25 percent. He was speaking to villagers today as part of the central bank's outreach program. Consumer-price inflation was 9.31 percent in May, the second-fastest in the Group of 20 major economies. Wholesale prices climbed 4.7 percent, the slowest pace in 43 months. Indian gross domestic product rose 5 percent in the year ended March, the least since 2003. Moderating investment, an extended fight against price pressures and a drop in exports hurt the expansion in Asia's No. 3 economy. To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNEuDxWwrMiQGsOAD-MN1g-2Q0AnYA&url=http://www.bloomberg.com/news/2013-07-11/subbarao-says-hard-to-predict-when-indian-rupee-will-stem-drop.html

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