India May Keep Interest Rates Unchanged Amid Capital Controls

India's central bank will probably keep all three of its policy rates unchanged for the second time this year amid expectations curbs on foreign capital will prevent excess cash from reigniting inflation.

The Reserve Bank of India will hold its overnight borrowing rate at 6 percent and leave its lending rate at 7.75 percent, according to all but three of 22 analysts in a Bloomberg survey. Fifteen expect no change in the level of reserves lenders must set aside. The decision is due at noon in Mumbai tomorrow.

Governor Yaga Venugopal Reddy has managed to drag inflation down to a five-year low by raising interest rates nine times since October 2004 and lifting the cash-reserve ratio on four occasions. He's now getting help from the stock-market regulator, which is clamping down on record foreign inflows that have pushed the rupee to a 9 1/2-year high and increased money supply.

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