Bank of America-Merill Lynch (BofA-ML) expects the Reserve Bank of India (RBI) to reiterate its dovish April commentary and pause on rates on Tuesday. It is betting on a ‘final’ 25 basis point cut on August 9 subject to a normal monsoon.
“In our view, the RBI policy will reiterate April's relatively dovish policy stance of watching macroeconomic and financial developments in the months ahead with a view to responding with monetary action as space opens up,” the brokerage said in a note.
“Assuming normal rains the India Met predicts, we expect the RBI to cut 25 bps on August 9 as we see no reason to delay further. Beyond this, however, we see little headroom for further easing,” it added. BofA-ML noted that the RBI repo rate, at 6.5 percent is already running below the medium-term CPI inflation, at 6.9 percent, implying savers were getting a 'real' rate of return.
“In our view, the RBI policy will reiterate April's relatively dovish policy stance of watching macroeconomic and financial developments in the months ahead with a view to responding with monetary action as space opens up,” the brokerage said in a note.
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