New Delhi: Reserve Bank of India is likely to keep the benchmark repo rate unchanged at 7.25 per cent in its policy review meet next week, a DBS report says. According to the global financial services firm, besides the impact on markets, the Central Bank would take cues from the US Federal Reserve this week for its rate trajectory.
"The RBI meets next on August 4 and we expect the benchmark Repo rate to be held unchanged at 7.25 per cent after cumulative 75 bps cuts since January 2015," DBS said in a research note on July 28. The report noted that, if the official commentary signals a start to the US rate hiking cycle later this year, "it will affirm our expectations that the RBI will maintain a prolonged pause on the rates front".
According to DBS, besides the P-Notes issue, other domestic factor weighing on market is the unproductive monsoon parliament session, which began last week. "An uneventful parliamentary session will be negative for market sentiments and could further delay the recovery process," it said.
There has been a significant disruption by the opposition parties, with the government's lack of majority in the upper house also weakening its position in getting key bills approved. In the June 2 policy review meet, the RBI had cut repo by 0.25 per cent for the third time this year to spur investment and growth, but hinted that there may not be any more cuts in the near term.
RBI cut the repo rate (short-term lending rate) from 7.5 per cent to 7.25 in June, but left all other policy tools such as cash reserve ratio (CRR) and statutory liquidity ratio (SLR) unchanged at 4 per cent and 21.5 per cent, respectively.
