Wednesday, 18 January 2017

RBI may consider a rate cut in first half of this year

The Reserve Bank of India is expected to go for a rate cut in the first half of this year, largely owing to 'below estimate' inflation, says a DBS report. Rising prices of petrol and diesel fuelled WPI inflation to 3.39 per cent in December 2016. According to the global financial services major, the WPI readings are likely to head towards 4 per cent in the first quarter of this year from 3.4 per cent in October-December quarter of 2016.

These readings are far from "threatening" levels and still hovering below the 5.4 per cent averaged in the past decade. "On policy, the RBI is likely to monitor CPI inflation more closely. Below-estimate inflation and soft incoming data is expected to prod the central bank to consider a rate cut in first half of this year," DBS said in a research note. Though timings of the rate cut, between the February and April policy meetings is a 'close call', following which rates are likely to 'plateau' it said.

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