RBI Might Not Pause Rate Cut Cycle As Of Now

The RBI had cut the Repo rate by 35 bps to 5.40% in its 3rd monetary Policy review and also decided to maintain the accommodative stance of monetary policy, noted the SBI in the latest edition of its research update Ecowrap. It stated that there is a rate easing cycle across global central banks and the support required to the market to come back on the growth trajectory seems to be more pronounced than what was in 2008.

The trade wars have impacted the global trade and domestic growth has also weakened in emerging economies. However, the bank noted that the transmission happening quicker and by a larger magnitude than before. A look on the MCLR cuts announced by the major banks gives a picture rate transmission. RBI may not pause the rate cut cycle as of now, but would take a calculated move based on the inflation picture and growth parameters such as exports, IIP etc.

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