RBI NEEDS TO ENSURE LENDING RATES REMAIN IN RANGE NEXT FISCAL

As widely expected, the RBI kept the key benchmark interest rates unchanged on Friday.

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Apart from an obvious signal for a prolonged pause, some fear that the scope for further cuts has shrunk more than imagined earlier. With inflation expected to shoot up next fiscal owing to normalisation of food prices and adverse base effects, only a shock to the growth-inflation balance may prompt the Monetary Policy Committee to cut the repo rate from the current 5.25 percent. Given the favourable growth outlook supported by a series of trade pacts and easing inflation, the RBI firmly believes the current rate is just what is needed for the economy for now.