RBI Likely to Keep Rates at 18 Month High

Indian central bank Governor Raghuram Rajan will keep the benchmark interest rate at an 18-month high to fight Asia’s second-fastest inflation after raising it three times since taking office last year.

The benchmark repurchase rate will be left at 8 percent, according to all 34 economists in a Bloomberg survey before the Reserve Bank of India’s policy review tomorrow, the highest since January 2013. Finance Minister Arun Jaitley agreed with Rajan on the need to curb inflation when the two met last week following Prime Minister Narendra Modi’s landslide election win.

Modi’s control over parliament puts him in position to narrow the budget deficit and boost Asia’s third-largest economy, prompting stocks and the rupee to surge on optimism that India will lead a recovery in the world’s biggest emerging markets. Jaitley said he’d make reducing the fiscal shortfall a priority when he unveils the budget in July, in line with Rajan’s wishes.

Bloomberg

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