Fed cut relevant, not determining factor: RBI

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"RBI has its monetary policy where a number of factors are taken into account, and Fed rate cut is a relevant but not necessarily determining factor in this regard," Reddy told reporters.

Analysts said Reddy's comments showed the RBI was cautiously watching global and domestic developments.

"The RBI is still in a wait and watch mode. Probably the monetary cycle would be diverging in India and the United States over the course of next year," said A. Prasanna, analyst at ICICI Securities in Mumbai.

The Fed on Tuesday trimmed its benchmark federal funds rate by 25 basis points to 4.25 percent, and also lowered the discount rate, at which banks can borrow directly, by the same amount to 4.75 percent.

The RBI has raised interest rates five times since June last year.

At a policy review in October, the RBI raised the proportion of cash banks have to keep with it on deposit to soak up cash that could otherwise fuel inflation.

It left interest rates unchanged. The RBI will next review monetary policy at the end of January.

The RBI and the government expect economic growth to moderate to 8.5 percent in 2007/08 from 9.4 percent in 2006/07 but policymakers say managing high capital inflows without hurting growth and ensuring price stability is a challenge.

Finance Minister Palaniappan Chidambaram told reporters on Thursday: "I have told you, let's wait and see what implication it has," when asked about the implications for India from the Fed rate cut.

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