Rates may moderate in 6-12 mths - Chidambaram

By Sumeet Chatterjee

BANGALORE (Reuters) - Indian interest rates should moderate from current high levels over the next six to 12 months, Finance Minister Palaniappan Chidambaram said on Friday.

Earlier this week, the Reserve Bank of India (RBI) raised its key lending rate by 50 basis points to a seven-year high of 9 percent and banks' reserve requirements by 25 basis points to try to rein in inflation, which hit 11.98 percent in annual terms in mid-July.

"These interest rates will not remain high forever and forever," Chidambaram said.

"We will get out of this trough and we will go back to moderate and normal interest rates hopefully in about six months to a year," he said, without indicating what level that was.

Prior to this week's tightening, the RBI had raised the repo rate by 75 basis points in June and the cash reserve ratio by 125 basis points in 2008

"The last four years have been good," Chidambaram said. "This year is a difficult year."

"This year is difficult because of rising crude oil prices and commodity prices," Chidambaram said.

India's growth rate has averaged nearly 9 percent over the past four fiscal years. Growth is expected to moderate to around 8 percent in the fiscal year ending March 2009.