Ritika Mankar Mukherjee, Economist - Associate Vice President, Ambit Capital, says: "Following the publication of the 29th September monetary policy review, we made the point that whilst we continue to expect the RBI to cut the repo rate by another 25 bps over the remainder of FY16, we do not expect the RBI to administer this rate cut at the next monetary policy review scheduled for December 1, 2015 given that: (1) We expect the Fed to administer a rate hike before the end of CY15; and (2) The RBI has clearly said that in the immediate term it will focus on ensuring banks pass on the policy rate cuts. The RBI today moved fully in line with our expectations.
Whilst highlighting the downside risks to both its inflation and GDP forecast, the RBI made the point that it does not expect the Government to deviate from its fiscal commitments despite the Pay Commission reward as it said that, “though its Pay Commission reward’s direct effect on aggregate demand is likely to be offset by appropriate budgetary tightening as the Government stays on the fiscal consolidation path.
Against this backdrop, we re iterate our view point that the RBI is likely to administer one last rate cut in FY16 at the next monetary policy review due in February 2016. Additionally it will continue to focus on improving monetary policy transmission by pushing for the deregulation of small savings interest rates and improving debt restructuring as well as recognition systems."
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.