Zee Media Bureau
New Delhi: The Reserve Bank of India (RBI) is expected to keep interest rates unchanged at its bi-monthly monetary policy review on Tuesday amid lingering concerns over inflation, after having already cut the repo rate by a sharper 50 basis points at its last meet.
RBI has also been cautious ahead of an expected rate increase by the US Federal Reserve, which meets in mid-December.
Also Read: RBI policy review: Know why the central bank may keep rates on hold
Inflation based on the consumer price index rose to 5 percent in October, from 4.41 percent in September, mainly on the back of rising food prices.
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Analysts are of the view that the Reserve Bank of India is likely to wait for the Budget announcement before proceeding further.
The two key events the central bank is watching are the upcoming Fed event and the impact of the 7th Pay Commission recommendations.
There is a possibility that interest rates in the US might eventually go up for the first time since the global economic crisis of 2008. Federal Reserve rate-setters are meeting on December 15-16 to take a call on this.
Also Read: RBI Credit Policy: Here's what experts think
Even bankers feel that given the current macroeconomic scenario, Governor Raghuram Rajan in all probability will go for a status quo.
The central bank is also mindful of the inflationary impact of a falling rupee, which has already hit a two-year low against the dollar recently.
The bankers argue that Rajan has already "front-loaded" rate reductions and is now keen on policy transmission of a his cumulative 125 bps cut so far this year by the lenders.
In the last policy, RBI saw inflation reaching 5.8 per cent by January 2016, under its goal of 6 percent.
