RBI Policy Review - Springs a 50bps surprise :: Edelweiss PDF link

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In a surprise move, in its annual monetary policy review, the Reserve Bank of India (RBI) cut its repo rate by 50bps while keeping CRR unchanged. Fall in core inflation and below-trend growth have motivated central bank’s action and we perceive it to be growth supportive. However, RBI has guided that room for further rate cuts is limited given its assessment that output gap is only modest. We believe future rate actions will be largely data dependent (evolving growth-inflation dynamics). Barring failed monsoon or unexpected spike in international commodity prices, inflation should remain around current level and since the economy will require further support from monetary policy, Mint Street will undertake at least another 25bps policy rate cut; timing of the move, however, is uncertain at this juncture.

RBI Policy Review - Springs a 50bps surprise

       
       
       
       
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