The Reserve Bank is likely to keep interest rates stable in its monetary policy review later this month in view of the impending domestic oil price hike, and a possible US Federal Reserve rate cut which can lead to larger capital inflows into India, bankers and economists said."RBI is likely to signal a stable interest rate regime for this quarter. We feel the RBI might maintain both the repo and reverse repo rates at the same level," Indian Banks' Association's Chief Executive, H N Sinor, told PTI here.In its last monetary policy review for 2007-08 this month-end, the apex bank is likely to continue with its tight monetary policy initiated in mid-2006 with inflationary and excess liquidity pressures persisting.A possible recession in the US would also be factored in by the RBI, as a widely-expected Fed rate cut could lead to large capital inflows into India, putting pressure on the appreciating rupee and liquidity management."Money supply is expanding rapidly and a US Fed cut will attract more inflows," Bank of Baroda's chief economist Rupa Rege Nitsure said. The Fed may cut rates by 0.50%, she said, with some people even expecting a 0.75%."The interest rate differential between India and the US, presently at 3.50% could widen to 4% then, leading to greater inflows into the country, putting liquidity management under pressure," she said.
