Terminal rate, policy tone may be in focus

With the Reserve Bank of India (RBI) set to announce on Friday the review of the June meeting of its monetary policy committee (MPC), what will be watched are the tone of the policy and if there is any indication how much the central bank will reduce interest rates further, given the current growth-inflation dynamics.

- ANJALI KUMARI & MANOJIT SAHA

The six-member panel reduced the policy repo rate by 25 basis points each in the two previous policy review meetings, in February and April.

It is expected that the panel will cut the rate by another 25 basis points.

"The terminal rate is expected to settle at 5.5 per cent. Despite the recent GDP (gross domestic product) numbers, the RBI is likely to retain its growth projection at the existing level," said Madan Sabnavis, chief economist, Bank of Baroda.

India's economic growth for January-March period was 7.4 per cent, higher than the consensus estimate. The central bank has projected GDP growth of 6.5 per cent this financial year.