The Reserve Bank of India (RBI) is likely to keep key interest rates unchanged in the policy review Tuesday as inflation remains at elevated level.
However, the central bank is likely to cut the cash reserve ratio (CRR) for the third time in a row.
In the second quarter review of monetary policy for 2012-13 announced Oct 30, the RBI lowered the CRR by 0.25 percent, but kept repo and reverse repo rates, which determine lending and borrowing rates by the commercial banks, unchanged.
The wholesale price index based inflation declined to a 10-month low of 7.24 percent in November as against 7.45 percent in the previous month, according to the government data released last week.
Despite the recent decline, inflation remained much above the central bank's comfort level of 4-5 percent.