RBI To Cut Rates Before Next MPC, Says Foreign Brokerage

Even before the next scheduled MPC meet, the central bank may cut the rates by as much as 75 bps given the benign inflation rate to fast track the slowing economy, said the foreign brokerage.

RBI To Cut Rates Before Next MPC, Says Foreign Brokerage

The move shall all the more be to infuse liquidity amid a pandemic-hit world.

After a cool off in CPI data to 6.6% levels, the Bank of America in its report released on March 13 said, "We expect the RBI MPC (monetary policy committee) to cut rates by 25 percent before or on April 3 with inflation having peaked".

Alongside, maintaining inflation within a territory of 2-6%, the government will be tasked to take a rate cut call due to global growth contraction as well as stimulus and rate cut measures taken by most developed economies including the US and Europe.

"An immediate RBI rate cut will lower lending rates for banks' MSME/retail/mortgage loans before the 'busy' industrial season ends in March," the brokerage said.
Further, Barclays also opined that a rate cut decision can be possibly taken between the policies.
So, after the rate cut is implemented before the policy meet on April 3, there can be again a cut in June and thereafter there could be a pause with rate cut again in October.
Also, the brokerage lowered its inflation forecast for FY21 to 4% from 4.8% earlier.
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