RBI May Cut Interest Rates By 25 Basis Points On Feb 8

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The Reserve Bank of India is widely expected to cut interest rates in its policy meet tomorrow. There are also some who believe that there maybe no cut in interest rates. 

RBI May Cut Interest Rates By 25 Basis Points On Feb 8
The Budget is positive for the medium-term inflation outlook which may lead to a 25 bps rate cut at the monetary policy meet next week, but RBI is expected to keep it on hold for the whole of 2017, says a report.

According to Japanese financial services major Nomura, though the Reserve Bank might go for a policy easing on February 8, it would be a "close call" considering some global factors like higher oil prices and narrowing interest rate differentials.

"On the monetary policy front, with the government sticking to fiscal consolidation and headline CPI likely to undershoot the RBI's March 2017 target of 5 per cent, we are pencilling in a final 25 bps repo rate cut to 6 per cent on February 8," Nomura said in a research note adding with global factors turning negative (higher oil prices, narrowing interest rate differentials), "this is a close call".
Thereafter, Nomura expects both growth and inflation to accelerate, keeping the RBI on hold throughout 2017.

In its last policy meet of December 7, the Reserve Bank of India kept interest rate steady, which was a surprise for the markets. It is unlikely to surprise again given the government's fiscal consolidation announced in the Union Budget 2017-18 and the lower than expected inflation numbers. 

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