Business Daily from THE HINDU group of publications
Tuesday, Sep 25, 2007
ePaper
Business Daily from THE HINDU group of publications Tuesday, Sep 25, 2007 ePaper |
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Money & Banking
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Interest Rates Industry & Economy - Economy Agri-Biz & Commodities - Commodities Interest rate: Immediate relief unlikely for corporate financials
BL Research Bureau The firm trend, which has been witnessed in commodities prices - both for consumption commodities such as oil, copper / other metals and investment commodities such as gold - in recent times, could slow down or moderate the movement towards lower interest rates in the markets despite low headline inflation. Domestic oil prices, for instance, have not been adjusted to take account of the higher oil prices which have prevailed in global markets in the past half year and more. Likewise, food prices too face upward pressure. These pressures will have a bearing on the level of wholesale /consumer price inflation in the ensuing period. Appreciation of the local currency’s exchange rate, as is happening with respect to the rupee, may not fully mitigate the pressures on costs and prices and that too in the short-term. It is also possible that global commodities demand gets boosted on the back of the liquidity which will flow from the rate cut(s) in the US. In the event, commodities’ prices may continue to remain firm unless the on-going shake-outs in the financial markets drag the real economy also down substantially (despite the rate cuts which are aimed at forestalling such an eventuality). Interest rates, in this scenario, could remain somewhat stable though with a downward bias. Corporate financials, therefore, may not get immediate relief on the interest rates front. More Stories on : Interest Rates | Economy | Commodities
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