The Reserve Bank said on Friday it would come out with the monetary review on July 27, 2010, amid expectations that it would tighten policy rates to check the double digit inflation.
However, since the banking system is facing tight cash conditions due to payment for spectrum for high speed telecom and broadband services and advance tax outgo, some experts are also of the view that RBI would wait for liquidity to ease before going for rate hikes.
RBI Governor D Subbarao 'will announce the First Quarter Review of Monetary Policy for 2010-11 on Tuesday, July 27, 2010,' the central bank said.
It added that the review would be done in a meeting with the chief executives of major scheduled commercial banks at RBI's central office in Mumbai.
RBI had hiked the borrowing and lending rates by 25 basis points at its last review in April to 3.75 per cent (reverse repo rates) and 5.25 per cent (repo rates) respectively.
It also raised the cash reserve ratio, the portion of money banks park with it by 25 basis points, sucking out Rs 12,500 crore (Rs 125 billion) of excess cash from the banking system.
Led by food inflation, which has been above the 16 per cent for nine straight weeks and ruling at 16.90 per cent for the week ended June 12, the general inflation reached double digits at 10.16 per cent in May.
"Inflation rate has reached uncomfortable levels.
"Therefore, some action is called for. It is for the Reserve Bank to decide on the timing. But, some action is called for," Prime Minister's Economic Advisory Council chairman C Rangarajan had said earlier this week, setting of speculation action could come before the bank's July 27 scheduled policy review.
Finance Minister Pranab Mukherjee too had dropped broad hints that there could be policy action by RBI, saying: "So far as the monetary part is concerned, the Reserve Bank will look into it."
However, economists indicated no such immediate action was warranted as the index is almost unchanged.
"There is no trend . . . anxiety is still there. Though there is change in the composition, index as a whole is at the same level," chief statistician of India Pronab Sen said.
Food inflation has been above the 16 per cent mark for nine straight weeks.
"Food inflation may start coming down post July . . . I do not expect the Reserve Bank to take any monetary action before its July meeting," Crisil principal economist D K Joshi said.
Mukherjee too had spoken about a good monsoon having a softening impact on inflation.
