Business Standard

50 bps rate cut likely in RBI policy review: Credit Suisse

In the mid-quarter monetary policy review on December 18, RBI kept key interest rates unchanged

Related News

The Reserve Bank is likely to cut key interest rates by 0.50%, to 7.5%, in the forthcoming review on easing inflationary pressures, says a research report.

Positive surprises in the recent WPI data -- both headline and core -- and likely ebbing of inflationary pressures may prompt the central bank to cut key interest rate in its next policy meet, it said.

"Following a break of nine months, we expect the Reserve Bank to cut the repo rate at its January 29 meeting, probably by 50 basis (0.5%) points to 7.5%," it said.

According to the report: "The move would be best described as a belated pat on the government's back following its September reform announcements."

Going forward, the repo rate is likely to drop to 6.75% by July 2013, as the core and headline WPI inflation is likely to drop below 4% and 6% respectively by mid-2013, Credit Suisse Research Analyst Robert Prior-Wandesforde said in the research note.

Retail inflation, based on consumer price index (CPI), remained close to double digits at 9.90% in November, while, the WPI inflation in November stood at 7.24%.

Though these levels are much above the Reserve Bank's comfort zone of 5-5.5%, inflation is showing some signs of easing in recent months.

"We doubt that a January cut requires inflation to drop further from here," the report said.

On October 30, had pointed out that "the baseline scenario suggests there is a reasonable likelihood of further easing in the January-March quarter of 2013".

In the mid-quarter monetary policy review on December 18, RBI kept key interest rates unchanged.

It left the short-term lending (repo) rate and the cash reserve ratio -- the amount of deposits banks have to park with RBI -- unchanged at 8% and 4.25%, respectively.

Read more on:   
|
|
|

Read More

'RBI rate cut to boost SME, credit off take'

The move, according to cooperative banking leaders, would support small and medium industries and increase credit offtake

Quick Links

More news from Finance Rss icon

Appointment of insurance agents

The Insurance Regulatory and Development Authority of India on Tuesday brought out an exposure draft for appointment of insurance agents. The ...

IBA to push for one more year of benefit for loans

With an economic revival taking longer than expected, banks plan to approach the Reserve Bank of India (RBI) to continue asset classification ...

SBI to raise Rs 15,000 cr via equity offering

Keeps option open for overseas issue

Back to Top