Nomura Says Policy Rates Touch Neutral, Sees No Cuts till 2017

Subscribe to GoodReturns
For Quick Alerts
ALLOW NOTIFICATIONS  
For Daily Alerts

    Mumbai, Mar 6 (PTI) With the second surprise 25 bps repo rate cut by the Reserve Bank on March 4, the policy rates have reached neutral and the average policy rate over the next three years should be around 7.4 per cent, says a report.

    "Based on our inflation and growth forecasts, and the RBI's inflation targets, we estimate that the average policy rate over the next three years should be around 7.4 per cent as the policy rates have reached neutral," Japanese brokerage Nomura said in a note.

    Nomura Says Policy Rates Touch Neutral, Sees No Cuts till 2017

    It can be noted that Governor Raghuram Rajan took the markets and analysts by surprise within two months by reducing the short term lending rates by 25 bps to 7.5 per cent on March 4 after a similar inter-meeting cut on January 15.

    Rajan cited lower inflation, credible and high quality fiscal consolidation, and exchange rate appreciation as the key reasons for the policy action.

    He also said two factors justified the inter-meeting action -- weak growth and the global trend towards easing; and the need to offer guidance on how it will implement the new flexible inflation targeting mandate.

    The economists, however, said they see "a risk of another 25 bps cut this year", but have maintained its baseline view of no further cuts.

    "In our view, with growth shifting higher, the government already focused on reviving growth by kick-starting public investment in infrastructure, inflation is likely to stabilise at 5-5.5 per cent and external risk factors growing, the case for incremental monetary policy easing no longer exists, if the RBI is serious about 4 per cent inflation," its economists said.

    PTI

    Read more about: nomura rate cuts
    Company Search
    Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'
    India's LARGEST EVER political poll. Have you participated yet?

    Find IFSC

    We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more