India's central bank is likely to hold its key interest rates steady on Tuesday as it waits for a clearer picture of inflation.
However, economists look forward to a quarter-point cut in rates in June and see little room for reduction thereafter given the possibility of U.S. interest rate hikes that could trigger capital outflows.
The Reserve Bank of India, led by Governor Raghuram Rajan, is expected to leave the repo rate unchanged at 7.50 percent and the reverse repo rate steady at 6.50 percent.
The bank cut rates twice this year. The previous move in interest rates was a 25 basis points cut in a surprise session on March 4. Rajan also had reduced rates in an unscheduled meeting in January.
The cash reserve ratio is also expected to be left unchanged at 4 percent in the April 7 meeting.
The repo rate is the rate at which the central bank lends to commercial banks and the reverse repo rate is the rate at which the central bank accepts deposits from banks.
As global oil prices fell, India's inflation hit a record low in November. Consumer price inflation climbed to 5.37 percent in February. Early March, India's government and the central bank revealed a deal to revamp the monetary policy framework to place focus on inflation.
Accordingly, the inflation target for the financial year 2016-17 and all subsequent years was set at 4 percent, with a band of plus or minus 2 percent. Under the deal, the central bank will aim to bring inflation below 6 percent by January 2016.
In March, Rajan said disinflation in the economy was proceeding at a faster pace than envisaged earlier. However, the inflation outlook is unclear given the uncertain path of oil prices and the impact of nonseasonal rains on food prices.
Economists also raised the prospect of rupee depreciation in the coming months that could push import costs higher.
Monetary policy transmission remains a concern and the RBI has also been urging the country's lenders to pass on its previous rate cut to retail borrowers.
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May 01, 2026 15:54 ET Central banks dominated the economics news flow this week with almost all major ones announcing their latest policy decisions and many boosted expectations for a rate hike in June. In other news, several countries released the preliminary data for first quarter economic growth. In the U.S., comments by Fed Chair Jerome Powell were also in focus as his term ends this month.