Standard Chartered Bank expects the Reserve Bank of India to most likely keep the policy rates unchanged for the rest of 2014.
The status quo looks like the most likely scenario for this year unless consumer price index (CPI)-based inflation falls below 8 per cent, said a Standard Chartered research note released ahead of RBI’s policy review meeting on Tuesday.
For the January 28 review, Standard Chartered has maintained its view that RBI will keep the repo rate on hold. This will be the case especially with headline CPI now trending lower.
The RBI will wait for the lagged disinflationary effects of its earlier (September and October 2013) rate hikes, according to the research note.
Standard Chartered also sees little scope for policy rate cuts in 2014 if the monetary policy framework recommended by the Urjit Patel committee is adopted. However, if headline CPI dips below 8 per cent and moves toward the next target of 6 per cent, the chance of rate cuts will rise, according to the foreign lender.
G-secs yields For the remainder of 2014, the pace of implementation of the Urjit Patel committee recommendations is likely to influence the trajectories of G-sec yields. Given Standard Chartered’s expectation of stable policy rates and improving inflation dynamics in the second half of 2014, it expects G-sec yields to peak in H1-2014.