All eyes on Rajan as industry pitches for rate cut

All eyes are on new Reserve Bank Governor Raghuram Rajan who will come out with his maiden monetary policy review tomorrow amid conflicting demands for rate cut and an urgent need to contain inflation which soared to 6-month high of 6.1% in August.

Much to Rajan's comfort, the US Federal Reserve has decided against tapering its monetary stimulus - under which it has been buying assets worth USD 85 billion every month - giving him space to go ahead with steps to arrest declining economic growth.

The positive impact of the Fed decision on stock and currency markets today will have a bearing on Rajan's policy announcements, which was pushed back by two days in view of the Fed's crucial meeting yesterday.

Bankers and industry have continued to pitch for lowering of rate and easing of liquidity ahead of the mid-quarter review of the monetary policy for 2013-14. "We have made our recommendations for releasing the liquidity, making it more accessible, making it less expensive," State Bank of India (SBI) Chairman Pratip Chaudhuri said. "We have recommended a cut CRR, repo rate and asked RBI not to restrict the MSF to a particular number. Whatever excess SLR banks hold that should be available for MSF (marginal standing facility)," he said.

Other experts, however, are of the opinion that Rajan will maintain status quo in view of rising inflation."I do not expect any change in the key interest rate tomorrow," said D K Joshi, chief economist at credit rating agency Crisil.

While BSE 30-stock index, Sensex, soared over 684 points or 3.4% to 20,646.64 today, the rupee gained 158 paise to trade at over one-month high of 61.80 against the dollar following US Fed's status quo stance.