Australia, India Raise Rates Before Fed Move

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"India's central bank probably won't raise interest rates in the next three months."

India's central bank said it probably won't raise interest rates in the next three months after tightening monetary policy the most in Asia this year.

"Immediate future rate action is unlikely barring some shocks," Reserve Bank of India Governor Duvvuri Subbarao said at a press conference in Mumbai yesterday after increasing benchmark rates for a sixth time in 2010. "The question is what is the immediate future? I would believe it is three months."

India's 12-year bonds gained the most in more than two months on Subbarao's guidance as nations from Japan to the U.S. consider additional monetary stimulus to support economic growth. The prospective pause comes as Subbarao said that global liquidity and rate differentials with advanced nations may lead to an "intensification" of capital flows into India.

"At this point the RBI has almost ruled out action in the next policy decision," said Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd. "There are uncertainties on the horizon, especially the impact of global quantitative easing on capital flows to India." India's central bank is scheduled to announce its next rate decision on Dec. 16.

Yields on India's most-traded debt due 2022 fell six basis points, or 0.06 percentage point, to 8.01 percent, the lowest level since September, at close of trading in Mumbai yesterday. The rupee appreciated 0.2% to 44.3775 per dollar, rising the most in a week, while the Bombay Stock Exchange's Sensitive Index was little changed at 20,345.69.

"Based purely on current growth and inflation trends, the Reserve Bank believes that the likelihood of further rate actions in the immediate future is relatively low," Subbarao said.

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