New Delhi: Industry experts and analysts widely expect RBI to cut its repo rate on Tuesday for the fourth time this year by at least 25 basis points to seven per cent — a four-year low — to boost the economic growth of the country.
“We expect the RBI to cut the policy repo rate by 25 basis points at the upcoming policy meeting on September 29. It (RBI) had laid out three conditions for more easing in the last policy meeting. Its first condition of inflationary pressures receding has been met,” said HSBC Global Research in a report.
It said that the second condition of sufficient monsoon, while not technically met, is not yet posing a huge problem. “The third condition of the impact from US Federal Reserve’s action stands good for now. With the Fed staying on hold in September, pressures on emerging market currencies have eased, providing a window for the RBI to cut rates,” it said.
For a central bank in an “accommodative mode”, these three, “in our view, should be sufficient in its bid to support economic recovery,” said HSBC.
Citi Research said that domestic data flow since last RBI policy remains supportive for “easing”. It said that while headline retail inflation (CPI) has stayed below four per cent, economic activity has moderated with first quarter GDP coming in at seven per cent against 7.4 per cent in the last quarter.
“A cut in interest rates is required to act as a demand push at the consumer level while at the same time, to help revive investment cycle, particularly in the private sector. Rather than a small cut, at least a 50 bps reduction in repo with a clear message to the banks to pass on the same, should be pushed,” said Assocham secretary general D.S. Rawat.
