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RBI May Hold Interest Rates Steady Next Week
The Reserve Bank of India (RBI) is expected to hold policy rates or interest rates steady in its policy meet on April 7.
The Cash Reserve Ratio will also be held steady since there is ample liquidity in the market. There are a few reasons why analysts believe that the RBI would hold interest rates. One is that there is an ongoing worry that food inflation would rise, because of the unseasonal rains in the country.
Secondly, oil prices can rebound anytime given the fact that tensions in the volatile Middle East region can spike anytime. The RBI does not want to be caught on the wrong foot.
Also, there are fears that an interest rate hike in the month of June in the US could lead to capital outflows which could lead to a volatile currency. Of course, this has receded slightly after weak US Jobs data for the month of March. In any case, all these factors are expected to play in the RBI's mind before it decides on interest rates.
The Monetary Policy has become more of a no event in the last few months, given the way in which the RBI has cut interest rates outside of the policy.
There are a few who believe that there could be an interest rate cut sometime later this year and the RBI may cut interest rates just one more time this year.
It's never too easy to predict the mind of RBI Governor Raghuram Rajan as he has surprised in the last few occasions. It would be interesting to see what he does next week, though one would not like to bet on an interest rate cut.
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