Zee Media Bureau
Mumbai: The Reserve Bank of India, in its second bi-monthly monetary review for 2014-15 to be held on Tuesday, is likely to keep key interest rates unchanged in a bid to contain inflationary pressures.
According to analysts, food inflation remaining over eight percent may be weighing heavily on the mind of RBI Governor Raghuram Rajan, who is known for the primacy he accords to controlling inflation.
Food inflation is a cause of worry for the government as a weak monsoon has dampened hopes of any easing of prices.
The country's key inflation based on the Wholesale Price Index (WPI) was recorded at 6.01 percent in May.
Data released by the Central Statistics Office (CSO), showed that retail inflation based on Consumer Price Index (CPI) declined to 7.31 percent in June from 8.28 percent in the previous month.
The central and state governments are taking steps to contain the rising food prices by either directly selling edible commodities or easing grain imports.
Tomato price has sky-rocketed in certain areas to nearly Rs 80 a kg.
The RBI is expected to keep its repo rate (at which it lends money to commercial banks) unchanged at 8 percent.
In the last policy review in June, the RBI retained the policy rate, making it the second consecutive time that Governor Rajan kept interest rates unchanged.
The cash reserve ratio (CRR) was also kept unchanged at 4 percent.
The statutory liquidity ratio (SLR), the mandatory amount of bonds lenders must keep with the RBI, was cut by 0.5 percent to 22.5 percent of their net demand and time liabilities (NDTL) with effect from June 14.
Rajan raised interest rates three times since he took office in September 2013, even as economic growth slowed to decade-low rates.
He has set a target of bringing down consumer price inflation to 8 percent by the end of the fiscal, and to 6 percent by the next fiscal.
Bank of America-Merill Lynch said it expects the rate cut to happen only in December, if the monsoon normalises to cool down inflation, or in early 2015 in case the price rise prolongs.
Yes Bank, in a report, said: "We expect the RBI to leave repo rate unchanged at 8 percent in its upcoming policy review. While near-term risks have imparted uncertainty to the inflation outlook, we believe that RBI’s first milestone of 8 percent CPI inflation target for January 2015 is not at risk".
(With IANS inputs)
