According to economists at Standard Chartered Bank the Indian central bank (RBI) is likely to stay put on rates in February, maintain its accommodative stance and stay data-dependent.
Key Quotes:
“While we expect headline CPI inflation to fall to c.6% by February 2020 – December CPI inflation of 7.35% was above the Monetary Policy Committee’s (MPC’s) mandated CPI inflation band of 4%+/-2ppt – H1-FY21 average CPI inflation is likely to be c.4.40%. Price pressure should soften by H2-FY21 as CPI inflation is likely to average 3.2%, below the MPC’s inflation target. We therefore shift our call for a rate cut of 25bps to the August MPC meeting, from June previously.”
“We maintain our call for a cumulative 40bps of rate cuts in FY21 for now (including 25bps in August). We await more clarity on the persistence of price pressures and the economic recovery. However, we acknowledge the risk of smaller cuts or a prolonged pause on rates if price pressures persist in FY21, despite a subdued growth recovery.”
Share
