The Reserve Bank of India [Get Quote] is unlikely to tamper with benchmark interest rates in its bid to keep inflation below 4-4.5 per cent, amid reports that leading lenders have recorded a sharp dip in housing and consumer loans.

While the annual rate of inflation has eased to below 4.5 per cent from over 6 per cent in April, the housing finance sector recorded a significant dip in the first quarter of the current fiscal warranting some interest rate moderation efforts by the RBI in its quarterly review of the monetary policy on Tuesday, July 31.

The central bank intervention becomes more important in view of the fact that leading housing finance players like ICICI Bank [Get Quote] and HDFC [Get Quote] have reported a sequential dip in housing loan disbursals by 42 and 35 per cent, respectively, in April-June 2007.

Expecting moderation in interest rates, ICICI Bank managing director and CEO K V Kamath said: ". . . liquidity is comfortable, inflation is under control, credit offtake is going down. I am sure RBI will keep these factors in mind while reviewing the credit policy."

The latest government data shows inflation at 4.41 per cent.

LIC Housing Finance [Get Quote] director and chief executive S K Mitter too said: "We only wish that the RBI does not do any thing that would have an adverse bearing on interest rates."

Analysts, however, said that RBI may slightly tighten the monetary policy especially in view of the higher growth in broad money supply which recorded a growth of 21.6 per cent as of July 6, 2007 compared to 19 per cent a year ago.

Taking into consideration the lagged and cumulative effects of monetary policy on demand and assuming conducive supply management and active management of capital flows, the policy endeavour would be to contain inflation close to five per cent in 2007-08, the apex bank said.

Elaborating on the price situation, RBI said that inflation has moved in a range of 4-6.4 per cent during 2007-08 so far.

Manufactured products, like cement, electrical machinery, edible oil and metals were the major drivers to domestic inflation.

Manufactured products' weightage on inflation was 58.1 per cent, followed by primary articles with 49.7 per cent. The fuel group's contribution to inflation was negative at 7.4 per cent, it said.

Primary articles inflation was led by wheat, vegetables, eggs, fish and meat, milk, oilseeds and raw cotton. As on July 14, it stood at 10 per cent, down from 10.7 per cent in March but higher than the previous year's level of 3.8 per cent.

"Wheat prices increased marginally by 0.4 per cent between end-March and July 14, but were higher by 11.1 per cent on y-o-y basis. Prices of oilseeds have increased 29.8 per cent y-o-y as against a decline of 6.2 per cent a year ago," RBI said.

Raw cotton prices were 16.9 per cent higher Y-o-Y as on July 14 as compared with 3.6 per cent in previous year.