Mumbai: Reserve Bank Of India will continue its stance of rate cuts till February.The Monetary Policy Committee (MPC) debuted with a 0.25 percent cut to 6.25 in the repo rate.
“With the indication that real interest rates (the differential between the key lending rate and inflation) may need to be lower than 1.50 per cent given prevailing global scenario of negative rates, further easing by the Monetary Policy Committee (MPC) can’t be ruled out,” its senior vice president Karthik Srinivasan said, adding that he is uncertain over the timing.
Economists at Bank of America Merill Lynch said however that the foreign brokerage doesn’t expect any rate cut in the upcoming review of the bi-monthly policy in December.
“We expect a final 0.25 per cent cut on February 7,” it said in a note.
Concurring with this view, Singaporean brokerage DBS also said the next rate cut can happen only in the first quarter of 2017 and not at the next policy review.
The RBI’s newly-appointed governor Urjit Patel had a conference call with analysts after the announcement of the policy on Tuesday day in which the media was not allowed.
DBS also attributed the cut to the change in the real rates framework.
Even though the policy document did not have a formal guidance, DBS added, the stance indicates lower inflation print continuing into the December quarter.
All the brokerages and analysts said that having committed to keeping the liquidity deficit at neutral, the RBI will continue its liquidity injection through the open market operations or buyback of G-Secs.