The Reserve Bank of India is likely to cut interest rates in its policy meet on August 2, 2017, after a 2-day meeting that will begin on August 1, 2017.

There has been a significant drop in inflation, which has now hit record lows. The RBI in the past has kept rates on hold at 6.25 per cent citing risk to inflation. It is likely to change its monetary stance though a 50 basis points cut at the moment may seem very agressive.

This is especially in view of some food items like tomatoes seeing a sharp increase in prices. A report by the State Bank of India recently noted that the inflation risks are now on the downside and expect the retail inflation to be sub-2 per cent for the next month, sub-3 per cent for August-September and sub-4 per cent for October-November and 4-4.5 per cent between December and March.

It is likely that we may see a drop in interest rates on loans, if the RBI cuts rates though this could be the lowest interest rates that we are seeing. Going forward it is unlikely that we may see any sharp drop in interest rates.

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