Monday, 6 February 2017

RBI may hold rates this year after 25 bps cut next week

Ripples Advisory Private Limited, Indore @9303093093

The budget is positive for the medium-term inflation outlook which may lead to a 25 bps rate cut at the monetary policy meet next week, but the Reserve Bank of India (RBI) is expected to keep it on hold for the whole of 2017. RBI might go for a policy easing on 8 February, it would be a “close call” considering some global factors like higher oil prices and narrowing interest rate differentials. 

“On the monetary policy front, with the government sticking to fiscal consolidation and headline CPI likely to undershoot the RBI’s March 2017 target of 5%, we are pencilling in a final 25 bps repo rate cut to 6% on February 8. Both growth and inflation to accelerate, keeping the RBI on hold throughout 2017. On 7 December, the central bank kept interest rate unchanged despite calls for lowering it. It also lowered the economic growth projection by half a percentage point to 7.1% in the first policy review post demonetisation.

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