RBI keeps rates steady, analysts see October rate cut
New Delhi: Continuing his inflation-focused policy, outgoing RBI governor on Tuesday kept key policy rates unchanged, citing upside risks to prices of food and service.
RBI kept the benchmark repurchase rate (at which RBI lends to the system) at five-year low of 6.50 per cent. The reverse repo rate, which is paid to banks, rema-ins six per cent, while cash reserve ratio will stay at four per cent.
Analysts, however, feel that RBI may cut interest rate as soon as Oct-ober as a good monsoon is likely to moderate food inflation, especially the prices of pluses.
“We expect another 0.25 per cent cut this fiscal — which could come as early as October,” said rating agency Crisil.
Since the last monetary policy meeting, higher food prices and sticky services inflation have meant the retail inflation in June tou-ched a 22-month high of 5.8 per cent.
“We believe this surge to be a blip and with adequate monsoon pulling it back,” said the rating agency. With uncertainty around global demand increasing post Brexit, oil prices have declined for the first time in July after surging in the preceding five months.
“Brent crude ended July at $40.76 per barrel compared with $48.05 at June-end. We expect oil prices to remain contained at $40-45 per barrel in 2016. That will help keep inflation, fiscal deficit and current account deficit under control,” said Crisil.