RBI’s credit policy today, rate cuts unlikely
The Reserve Bank of India (RBI) will be out with its credit policy on Monday amid mixed cues. It will continue to target inflation in its credit policy, that’s the unanimous view of bankers, economists and fund managers polled by CNBC-TV18. Eighty per cent of the market expects RBI to leave policy rates unchanged and only 20 per cent expect a cut in repo rate.
However, analysts believe there could be rate cuts later in the year. According to the poll, an overwhelming 80 per cent expect RBI to cut repo rate further before March-end 2013.
Chief Economist, Nomura India Sonal Varma said, “In our view, inflation readings above 8 per cent in the coming months, we don’t see rate cuts through this calendar year. Banking system liquidity is within the comfort zone. If needed, RBI can do open market operations. We are not expecting CRR cut on September 17. Even in October given inflationary pressures it will not be really feasible for RBI to cut rates.”
India Economist, JPMorgan Sajjid Chinoy said, “Nobody was expecting really a rate cut in September. I think, the most optimistic projection was that the central bank in its guidance would signal something on October 31. I think that a freedom, that degree of freedom has been significantly constrained after today’s print.”
The street is therefore expecting RBI to sound hawkish in his policy stance, maybe slightly more hawkish than July policy. Only 40 per cent expect a dovish policy stance. Growth will however get one sympathetic pat from RBI. The central bank is expected to reiterate its promise of adequate liquidity.
