Expectations rife on RBI's monetary policy

Expectations rife on RBI's monetary policy

 It is time once again for the Reserve Bank of India (RBI) governor Raghuram Rajan to take the centre stage as he unveils the third bi-monthly monetary policy for 2015-16.

While there was consensus the last time round about the likely outcome, brokerages and economists seem to be split this time about whether a rate cut is likely or whether its going to be a status quo today.

According to Exim Bank, the rising trend in inflation observed during the last two months and the rainfall deficits are expected to weigh over the considerations of weak economic performance. Consequently, policy rate cut by the RBI in its third bi-monthly policy appears bleak.

Motilal Oswal, on the other hand, believes that a rate cut cannot be ruled out. “While consensus forecast for August 4, 2015, policy event is that of a status quo, we do not rule out the possibility of a rate cut.

However, even if status quo is maintained, scope for an intermittent rate cut in between policy events look bright,” the brokerage firm said in a note recently. India Ratings believe that RBI could pause today and go for a rate cut in the next policy. HSBC also believes that though the prospects for a rate cut today are bleak, further rate cuts could be possible soon if rains remain non-disruptive.

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