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  Business   In Other News  31 Jul 2017  RBI likely to cut interest rate by 25 bps

RBI likely to cut interest rate by 25 bps

THE ASIAN AGE.
Published : Jul 31, 2017, 6:02 am IST
Updated : Jul 31, 2017, 6:40 am IST

Morgan Stanley is expecting a 25 basis point reduction in policy rates during the upcoming meeting of the RBI's monetary policy committee next week. 

According to Morgan Stanley, there will be limited scope for the RBI to go for more rates cuts in the backdrop of global central banks planning to further tighten their balance sheets. 
 According to Morgan Stanley, there will be limited scope for the RBI to go for more rates cuts in the backdrop of global central banks planning to further tighten their balance sheets. 

Mumbai: Amidst softening of inflation data over the last two months, global financial service firm Morgan Stanley is expecting a 25 basis point reduction in policy rates during the upcoming meeting of the Reserve Bank of India’s (RBI) monetary policy committee next week. 

However, it does not expect the August rate cut to signal a start of a new easing cycle as it believes that the growth is already on a recovery path and the key challenge at the moment is to revive private investment in which monetary policy has arguably a limited role to play. 

 

Analysts noted that the headline CPI inflation prints post the June meeting have decelerated in a broad-based fashion and have undershot the MPC’s (downwardly revised) expectations of CPI inflation remaining in the 2-3.5 per cent range for the first half of the fiscal year (April to September).

“Considering this slippage in inflation, coupled with the fact that forward-looking factors that earlier had clouded the inflation outlook had also turned out to be relatively benign, we therefore expect the RBI to take up one more rate cut in the August meeting. However, we do not expect any changes to the neutral monetary policy stance,” it said while lowering its inflation forecasts to 3.1 per cent in 2017 and 4.3 per cent in 2018. 

 

According to Morgan Stanley, there will be limited scope for the RBI to go for more rates cuts in the backdrop of global central banks planning to further tighten their balance sheets. 

Tags: morgan stanley, reserve bank of india
Location: India, Maharashtra, Mumbai (Bombay)