RBI Faces a Tough Choice on Rate Front on Tuesday

Aug 03, 2015: RBI is facing a tough choice on cutting the rate down again in this fiscal year. If the rate is lowered, it will meet government and industry expectation thereby, it will boost the growth.

As retail inflation remains high, most experts are in the view of the low probability of interest rate going down.


RBI Rate Cut


"I am not expecting any rate cut, “said SBI Chairperson Arundhati Bhattacharya.

"WPI is (negative) but CPI has gone up a little. Though, it is mainly on account of food prices. The RBI has been benchmarking it to the CPI numbers, I think it is unlikely," she added.

For the monetary policy decision RBI tracks the consumer price. In June, retail inflation rose to 5.4 percent, which is the eight-month high, the overall Wholesale  Price Index(WPI) based inflation was (-)2.4 percent in the same month.

"It would be a status quo. I don't think there has been much change in the macroeconomic conditions from the last policy. RBI is closely monitoring monsoon. Nothing indicates that it is a good or a bad monsoon, “said by Ranjan Dhawanon CEO and Managing Director of Bank of Baroda.

"The RBI meets next on August 4, and we expect the benchmark repo rate to be held unchanged at 7.25 per cent after cumulative 75 bps cuts since January 2015," DBS research report said.

 RBI has cut the repo rate from 7.50 per cent to 7.25 per cent in June 2015. The CRR and SLR were not changed by the RBI Governer.