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Why The RBI Will Cut Interest Rates On June 6?

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The Reserve Bank of India is likely to cut interest rates in its policy meeting, when a decision is taken on June 6.

Some are expecting an interest rate cut of as much as 0.50 per cent, while some other analysts are expecting a cut of 0.25 per cent.

Why The RBI Will Cut Interest Rates On June 6?
 

One of the reasons for this could be slowing growth. The economic research department of the State Bank of India (SBI) expects gross domestic product (GDP) growth for Q4 (January-March) FY19 at 6.1 per cent. This is very low, when compared to the previous quarters, which makes a strong case for a sharp interest rate cut, given benign inflation.

The country's central bank had slashed interest rate by 25 basis points each in February 2019 and April 2019 to boost economic growth.

Retail inflation, has also been consistently revised downwards. It is unlikely that we will see it move significantly higher anytime soon, given the way crude prices and food prices are. Consumer price inflation which was at 2.8 per cent for the fourth quarter of 2018-19 in the February 2019 policy meet, was revised downwards to 2.4 per cent.

Stock markets are already factoring a rate cut by 25 basis points. However, the RBI may even surprise with a rate cut of 50 basis points. At the moment, a 25 basis points cut in the repo rates is already a give.

GoodReturns.in

Read more about: rbi interest rates gdp sbi
Story first published: Wednesday, May 29, 2019, 9:17 [IST]
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