According to brokerage firm Credit Suisse, in its monetary policy meeting on January 29, the Reserve Bank of India (RBI) may reduce repo rate by 50 basis points, to 7.5 per cent because of decline in inflation.
In a recent research report, Robert Prior-Wandesforde of Credit Suisse said the repo rate may be reduced to 6.75 per cent by July 2013, as the core and headline WPI inflation are likely to drop below 4 per cent and 6 per cent respectively by mid-2013.
The report mentions that the RBI’s likely cut in repo rate would be best described as a belated pat on the governmentÂ’s back following its September reform announcements.
Retail inflation, based on consumer price index (CPI), remained close to double digits at 9.90 per cent in November, while, the WPI inflation in November stood at 7.24 per cent.
Though these levels are much above the Reserve BankÂ’s comfort zone of 5-5.5 per cent, inflation is showing some signs of easing in recent months.
In the mid-quarter monetary policy review on December 18, RBI kept key interest rates unchanged. On October 30, RBI had pointed out that “the baseline scenario suggests there is a reasonable likelihood of further easing in the January-March quarter of 2013“.
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