Space for rate cut by RBI, says SBI chief

State Bank of India (SBI) today said that there is a space for rate cut by the Reserve Bank of India (RBI) at its next policy later in the month as the possibility of food prices going up in coming months is negligible. "I do still believe that there is a space for rate cut in India. How much is difficult to state at this point of time," SBI chairperson Arundhati Bhattacharya said on the sidelines of an investor conference here.

The RBI is scheduled to announce its fourth bi-monthly policy review of the fiscal on September 29 amid pressure to cut rates to boost economic activity and growth. Bhattacharya said a negative pressure on food prices is unlikely in coming months. "Food prices, which drives CPI, they have a tendency of going up in July-September. So given that July-September has been reasonably good, therefore we dont see very huge pressure on food prices in coming months. That being the case, we see there is space for rate cut," she told CNBC TV18. The RBI has cut interest rates by 0.75 per cent in three equal tranches so far this year, but maintained status quo in its last monetary policy review on August 4.

Bhattacharya said that she sees scope for US Federal Reserve to raise interest rate in December. In what could be termed as the most-awaited Fed meeting since the 2008 global credit crisis, the worlds most powerful central bank yesterday postponed its intended decision to increase interest rates from zero to 0.25 per cent till the end of the year, giving a big relief to India and other developing countries. "The next year is an election year (in the US). And we dont believe that in an election year they would like to take a chance on Fed rate hike. So internally we are predicting a small hike in December," Bhattacharya said.