Mumbai: The Reserve Bank of India (RBI) is expected to keep its key interest rate unchanged at its penultimate monetary policy review of the fiscal on Wednesday owing to higher inflation in October and a surge in oil prices, even as the reversal in the decline of GDP growth during the second quarter has eased pressure on the central bank to cut rates.

At its previous bi-monthly policy review here in October, the RBI had maintained status quo on its repo, or short term lending rate for commercial banks, at six per cent, citing risks to inflation and uncertainties on the external and fiscal fronts.

The central bank had earlier, in August reduced the repo, or its repurchase rate by 0.25 percentage points to six per cent.

According to the minutes of October’s Monetary Policy Committee (MPC) meeting, Governor Urjit Patel said: “We have to be vigilant on account of uncertainties on the external and fiscal fronts; this calls for a cautious approach.” Japanese financial services major Nomura said in a report that input cost pressures are marginally higher now, which along with higher food inflation is likely to push retail inflation slightly above the RBI’s target of four per cent in November and beyond.

“We expect a hawkish hold from the RBI and policy rates to remain unchanged through 2018,” it said.

Data released in November showed that India’s annual rate of inflation based on wholesale prices (wholesale price index) rose to 3.59 per cent in October due to an exponential rise in food prices.

Indo-Asian News Service