(ET)
The Reserve Bank of India is likely to hold the benchmark interest rate after two increases this year and a cash squeeze even as economic growth eased in the June-September quarter to a less-than-expected pace.
The central bank may instead focus on greater liquidity, or cash availability, in the system, according to an ET poll of 23 market participants, who do not expect any rate action in the fifth bi-monthly monetary policy meeting to be held on Tuesday and Wednesday.Increasing the cost of funding could cloud the country’s growth prospects, the participants feel.
“Given the expected growth weakness, an extended pause in rates seems likely,” said Saugata Bhattacharya, chief economist at Axis Bank. “The RBI has to infuse significantly more liquidity into the system in the coming months, which in turn, may help increase credit flows.”
