Reserve Bank Governor Raghuram Rajan in his last monetary policy, may keep the interest rates unchanged as the retail inflation continues to be above the comfort zone, experts say. This will be the last bi-monthly monetary policy to be decided by the central bank Governor as the broad-based 6-member panel may take over the job before the next review on October 4.

“We are expecting that there will be no change in the rate because vegetable prices are on the rise. It will take a few months for the vegetable prices to come down when the kharif crops come into the market,” SBI Chairperson Arundhati Bhattacharya said.

“Lot of favourable developments in the economy – above average monsoon, low G-Sec rate, high forex reserve, low bond yield, twin deficit well within the range – augur well for rate cut of at least 0.5 per cent,” Yes Bank Managing Director Rana Kapoor said.

“Nothing is going to change in this policy as CPI has not reduced to the level where the RBI wanted it to be. The market has already discounted that rate is not going to be cut this time,” said a treasury head of a state-run bank. “Even the liquidity condition in the system is sufficient, so CRR will not be altered,” he added.

“With good rains, pulses’ sowing for the kharif season has jumped 39 per cent above last year’s sowing. This should pull down pulses prices by 20 per cent and cool CPI inflation to 5.1 per cent by March,” Bank of America Merrill Lynch said.

DBS, on the other hand, said that, RBI may keep the key interest rates on hold in the upcoming policy meet as inflation for the second quarter has hastened to 5.7 percent and July-August prints may also stay high. The room for further easing by the Reserve Bank is dependent on the inflation path and make-up of the monetary policy committee.

By Premji