RBI likely to hold rates; Rajan comments watched

The RBI has reduced its benchmark repo rate by 75 bps since January.

The Reserve Bank of India (RBI) is most likely to keep interest rates unchanged at its monetary policy review on Tuesday and markets will carefully interpret comments from Governor Raghuram Rajan to get clues on future course of action.

However, one financial daily quotes Moody’s Analytics as saying that the RBI could spring a surprise with a 25 basis point (bps) rate cut on Tuesday.

The RBI has reduced its benchmark repo rate by 75 bps since January. The last cut lowered the repo rate to 7.25% on June 2.

The RBI's next monetary policy review is set for Sept. 29, which would come after the Fed's September policy meeting. Going ahead, the Rajan & Co. will look for further direction on monetary policy from the overall monsoon season rainfall and its impact on domestic food prices, besides the Fed’s view on US interest rates.