The Reserve Bank of India (RBI) is likely to hold interest rates steady in its policy meet of Aug 4. Stock markets towards the end of the week rallied on hopes that there would be an interest rate cut, but, that looks unlikely.

A quick rate cut again by the RBI has been ruled out since retail inflation for the month of June spiked to a eight month high.

Investors are expecting the RBI to come out with an old cliche that it would be monitoring inflation closely. The problem for the RBI has been a sharp increase in food inflation. To compound worries would be that monsoon was deficit in the month of July, which may lead to inflation increasing in the next few months.

In a recent Reuters poll forecast of analysts only 4 of the 51 analysts felt that the RBI would cut rates. A bulk felt that the RBI would hold interest rates steady.

It's unlikely that the RBI would cut interest rates again. So, if individuals are expecting a drop in interest rates on home loans, auto loans and personal loans, it's unlikely to happen anytime soon.

GoodReturns.in