Mumbai: The Reserve Bank of India (RBI) will not go after the US Federal Reserve Board, and may not slash interest rates in a little while.

Market analysts said that the central bank that has been following a compressed money strategy will possibly not play with key policy rates in the coming time.

Indranil Sengupta and Ashish Agrawal, Merrill Lynch economists, said, “We do not expect the RBI to follow the US Fed into monetary easing as long as possible. Notwithstanding the country’s sub-4 per cent WPI inflation, inflationary risks like high monetary growth, rising oil prices and high machinery price inflation are actually on the up. It is unlikely, however, that the RBI will be able to hike policy rates as this will feed further rupee appreciation.”

“India is expected to continue the 8 per cent plus growth momentum. Domestic consumption spending is improving. But there could be dampeners like the slowdown in the US. Another worry could be the high oil prices... Though headline inflation is under control, inflationary pressures and expectations are high. So the RBI will not go for a rate cut in the near future. The rupee may remain under appreciation pressure if FII inflows increase,” said ABN Amro Bank senior economist Gaurav Kapur

The RBI has increased prime rates including the repo and reverse repo rates five times since June 2006, which leads to a wide-ranging growth in interest rates. It has also brought up the cash reserve ratio (CRR) two times in the recent fiscal. A higher rupee is already beginning to threaten exports plus the RBI’s own financial statement. Both the 6% LAF reverse repo rate and the 7.75 per cent LAF repo rate are already greater than US money market rates.

“Our US economics team expects the US Fed to cut the federal funds rate target by another 125 bps through 2008,” Merrill Lynch told.