Will there be another rate cut at RBI's Monetary Policy Committee meeting?

A rate cut weakens the rupee as foreign funds reduce their investments, but the flows have been strong and the central bank, encouraging the RBI to continue with its dollar swaps again in April

The six-member monetary policy committee (MPC) of the Reserve Bank of India (RBI) will likely announce a 25 basis points cut on Thursday, even as some in the market expect a deeper, 50 basis points cut. Clearly, in a rule-based policy, the key consideration for the central bank has shifted from inflation (which is lower than the RBI’s target of 4 per cent), to growth.
 
 The gross domestic product (GDP) growth fell below 7 per cent in December, pushing the RBI to cut rate in February.
 
However, transmission has not improved and hence another rate cut is expected. A rate cut technically weakens the rupee as foreign funds reduce their investments, but the flows have been strong and the central bank, encouraging the RBI to continue with its dollar swaps again in April.
 
Rupee is getting stronger due to increased flow, and this itself brings down the imported inflation. Oil prices have started inching up, which should be a key concern for the policymakers, but there is still some time left before oil regains importance in the policy statement.