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RBI may hold rates on August 9

Central Bank was likely to leave cash reserve ratio unchanged at 4.00 percent

Policy Pulse
Publish Date: Aug 5 2016 12:46PM | Updated Date: Aug 5 2016 12:46PM

RBI may hold rates on August 9

 Reserve Bank of India (RBI) Governor Raghuram Rajan may keep interest rates on hold on Tuesday, leaving it to his successor to decide if inflation is falling enough after the monsoon season to make another cut, a Reuters poll has said. 

 
At least five economists said the RBI would leave rates unchanged at 6.50 percent at Rajan's last policy review before he steps down in September. 
 
The Central Bank was likely to leave cash reserve ratio unchanged at 4.00 percent, the poll added. 
 
Expectations are high for a 25 basis point cut in repo rate to 6.25 percent in the final three months of this year, with the RBI holding steady thereafter until at least the end of 2017. 
 
Presently, inflation increasing  toward the upper end of RBI's 2-6 percent target range affected Rajan's chances of delivering a valedictory rate cut, according to most economists. 
 
Consumer prices increased by  5.77 percent in June, putting inflation above the RBI's March 2017 target of 5 percent for a third consecutive month. 
 
"The RBI will maintain the status quo until a clearer picture emerges with respect to the impact of the monsoon and wage hikes on inflation," said Dipanwita Dutta, economist at Punjab National Bank was quoted as saying by Reuters.
 
Above-average monsoon rains, critical for India's vast agricultural sector, are expected to increase farm output and rural income, which should help both cool food prices, and boost economic growth.