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MUMBAI: RBI's flip-flop on supporting growth has tempered the market perception of a sharp cut in the repo rate on Monday. Most bankers expect that RBI may cut rates by 25 basis points, if at all it chooses to reduce them.
On Thursday night, RBI deputy governor D Subbarao said inflation cannot be controlled without sacrificing some growth. The comments came after inflation for May, as measured by WPI, rose to 7.55% on the back of double-digit growth in food prices. "As the governor's comments come right before RBI's June 18 policy meeting, they suggest that RBI is unlikely to ease aggressively next week, if at all. We are expecting a 25 bps cut in the repo rate and no change in the cash reserve ratio, in line with consensus," said Sonal Verma, economist with Nomura.
The delay in monsoon has added to fears that food prices may remain high for some time. "A good monsoon will remain crucial in RBI's policy calibrations, as it will have implications for both inflation and growth. Headline inflation remains an issue — with May inflation at 7.55%.
Considering, it is coming with a softening core, it is not a major stumbling block to further rate cuts. In fact, we now expect RBI to reduce rates by 25 bps on June 18 in the mid-quarter policy review," said Rahul Bajoria and Siddhartha Sanyal of Barclays in a report here on Friday.
RBI may cut rates by 25 basis points - The Times of India
On Thursday night, RBI deputy governor D Subbarao said inflation cannot be controlled without sacrificing some growth. The comments came after inflation for May, as measured by WPI, rose to 7.55% on the back of double-digit growth in food prices. "As the governor's comments come right before RBI's June 18 policy meeting, they suggest that RBI is unlikely to ease aggressively next week, if at all. We are expecting a 25 bps cut in the repo rate and no change in the cash reserve ratio, in line with consensus," said Sonal Verma, economist with Nomura.
The delay in monsoon has added to fears that food prices may remain high for some time. "A good monsoon will remain crucial in RBI's policy calibrations, as it will have implications for both inflation and growth. Headline inflation remains an issue — with May inflation at 7.55%.
Considering, it is coming with a softening core, it is not a major stumbling block to further rate cuts. In fact, we now expect RBI to reduce rates by 25 bps on June 18 in the mid-quarter policy review," said Rahul Bajoria and Siddhartha Sanyal of Barclays in a report here on Friday.
RBI may cut rates by 25 basis points - The Times of India
