On one hand, the RBI will have to initiate measures to contain inflow of foreign capital -- which is expected to increase as an after effect of the Fed rate cut, on the other it will need to ensure that such inflows do not fuel inflationary pressures.

Another important task before the RBI would be to maintain growth momentum by arresting a declining demand for consumer durables, possibly by reducing the benchmark interest rates (repo rate) by 25 basis points.

Without indicating what RBI may do, Finance Minister P Chidambaram had said in Davos last week that the priority of the government would be to keep inflation rate low rather than focus on high growth. "Between inflation and growth, what hurts the poor most is the inflation. That is why we must keep inflation low."

At the moment, he added, "We are comfortable with inflation below 4 per cent and growth above 8 per cent... I will be in a great trouble if inflation rises to 6 per cent."

Echoing similar sentiments, RBI governor Y V Reddy had recently indicated that central bank would remain sensitive to uncertainties in global markets and high prices of crude oil and food items, which may fuel inflationary expectations.

According to SBI [Get Quote] chairman and managing director O P Bhatt, the Reserve Bank may not automatically cut rates in its monetary policy review this month end in the wake of 75 basis points reduction in key rates by the US central bank.

In the given scenario, it is expected that RBI without tinkering with CRR would cut repo rate by 25 basis points, PNB executive director K Raghuraman opined.