RBI Policy Preview - Expect 25bps cut in repo rate; Edelweiss PDF link

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In the forthcoming annual monetary policy review, the RBI is likely to cut repo rate by 25bps while keeping CRR unchanged. Our expectation is based on the assessment that investment activity is in deep slump and demand-led inflationary pressures have receded meaningfully (in our re-arranged WPI basket, it has dipped to historical average levels). At the same time, with falling inflation, real interest rates have risen meaningfully since December and call rates are hovering around 50bps above repo rate. In sum, monetary conditions have tightened even as growth has slowed and inflation has eased. Accordingly, we expect the central bank to initiate rate cut cycle with 25bps, although the policy tone is likely to remain hawkish.   

RBI Policy Preview - Expect 25bps cut in repo rate

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