JOIN USRepo rate cut by Reserve Bank of India on cards?
The chorus just seems to be getting louder for a rate cut by the Reserve Bank of India (RBI) Governor Raghuram Rajan. And the consensus certainly seems to suggest that Rajan is likely to oblige and cut rates by at least 25 basis points on June 2.
“We grow more confident of our call that Rajan will cut rates by 25 basis points on June 2 with CPI inflation well set on the below-6 per cent January target. We think that the RBI will likely pause thereafter to see our expected September Fed rate hike through. We have penciled in a further 50 bps cut in early 2016 after markets price in Fed tightening,” Bank of America Merrill Lynch said, in a recent report.
“In its April policy, the RBI said that further rate action will be contingent on transmission by banks, food inflation trends and supply side reforms. Thus the case for a 25 bps cut is strong especially since activity has also been soft eg. Industrial data (PMI, IIP), non-oil exports, credit growth,” Citi said in its note.
“Given the current real policy rate of 250 bps and subdued growth, there exists room for a 50 bps rate cut. Besides, with monetary easing taking effect with a lag, it has to be front-loaded.
“We reiterate that easing by at least 25 bps (50 bps being more appropriate) in the June policy meeting is imminent,” Edelweiss said.
Nirmal Bang however believes that governor Raghuram Rajan could surprise the markets by maintaining status quo on June 2.
“We expect the Reserve Bank of India to keep repo rate unchanged at 7.5 per cent at its monetary policy scheduled on June 2, 2015. This will be in line with the current inflation trajectory, increased fears of drought and an uncertain global economic environment. If conditions permit, we believe there is room to cut repo rate by 50 bps in H2 of FY16 to 7 per cent by end of March 2016,” Nirmal Bang said.
Ready, Steady...Rates!
Talks making rounds that RBI’s Rajan may cut rates
At least 25 basis points may be cut on June 2
Experts hopeful of surprise from Rajan
Prevailing economic conditions may influence central bank decision