http://www.livemint.com/Politics/qaCfnw1Rqe9w0ZbV7YFevN/Rajan-says-Fed-rate-hike-almost-certain-next-week-RBI-prepa.html
Kolkata: It is almost certain that the US Federal Reserve will raise interest rates next week, Reserve Bank of India (RBI) governor Raghuram Rajan said on Friday.
Speaking after a board meeting in Kolkata, Rajan said the Fed may raise rates by up to 25 basis points. One basis point is one-hundredth of a percentage point.
There is 70-75% chance that the Fed will raise interest rates next week, he said.
The Fed will meet on 15-16 December to decide on its future course of action. Most now expect it will announce a lift-off and hike rates for the first time in nearly a decade.
The RBI is prepared for any volatility in markets that this rate hike may lead to, according to Rajan and deputy governor Urjit Patel. It will trigger some changes in financial flow but the anticipated hike has been factored in by the market, said Patel.
“One cannot be completely confident but we are prepared for any eventuality,” Rajan added.
Earlier this week, RBI said it would intervene in the exchange-traded currency derivatives market if required. The move was seen as a way to ensure the RBI can manage any undue volatility that emerges on the currency.
On 4 December, the rupee hit a 27-month low of 67.01 to a dollar due to outflows from local equity markets. On Friday, the currency closed at 66.90 per dollar.
Foreign institutional investors have been selling in the equity markets. They have been sellers in 24 of the last 26 trading sessions. Since 30 October, they have sold a net of $1.8 billion, data from Bloomberg show
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