RBI may hold interest rates despite slowing growth, inflation

Few are forecasting an interest rate cut by Reserve Bank of India Governor Duvvuri Subbarao on Tuesday, despite growth slowing and inflation at a two-year low. Some are hoping for a cut in cash reserve ratio (CRR) without conviction. But everyone is praying, rather impatiently, that he does 'something' soon to revive the animal spirits. The first detailed monetary policy review since the curbs to arrest the rupee's slide against the dollar may dwell on the latest threat to economic management from the currency when domestic demand-fuelled inflation itself is yet to ebb. The inflation forecast of 7% by March may be retained, but the GDP growth estimate may be sliced to 7%, from 7.6%, amid falling demand for goods and subdued export growth due to the simmering European crisis. Any action will be a surprise.

Source: Economic Times