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The Reserve Bank of India (RBI) will announce its Interest Rate Decision on 6 August at 06:15 GMT. The market consensus is between economists who expect the RBI to stay on hold and others betting on a 25bps rate cut. As we get closer to the release time, here are the expectations forecast by the economists and researchers of seven major banks regarding the upcoming central bank’s meeting.

Rabobank

“We expect the RBI to cut policy rates by 50bp in order to foster loans growth and investment, and thereby trying to support a relatively favourable exit from the Covid-19 crisis.”

MUFG

“We expect the RBI to cut the benchmark repo rate by 25bps to 3.75%.”

ING

“We have been calling for one more 25bp cut in this cycle. However, a spike in CPI inflation during the pandemic above the RBI’s 6% policy limit has taken the steam out of this forecast. Still, we are keeping our rate cut forecast for next week. The consensus is almost evenly split on a ‘25bp rate cut’ and an ‘on-hold’ outcome.”

Standard Chartered

“We expect India’s Monetary Policy Committee (MPC) to keep the repo rate unchanged at 4.00% in a close call at its 4-6 August meeting. We will watch for any measures to improve monetary policy transmission. The statement, in our view, is likely to be dovish to assure markets of lower rates for longer as any indication of worries around inflation could push market yields higher and impede monetary policy transmission. While we expect the MPC to acknowledge the recent spike in inflation above 6%, it is likely to highlight a potential cooling of inflation below 4% in H2-FY21. We maintain our call for another 50bps rate cut in H2.”

TDS

“We expect the RBI to cut its policy repo rate by 25bp to 3.75% (mkt 3.75%) following 115bp of easing this year. The reverse repo rate is likely to be cut by a similar magnitude in our view; this rate has been cut by 155bp in the current cycle. Another permutation is for the RBI to cut the reverse repo rather than repo, encouraging banks to lend out more, but we think RBI will cut both repo and reverse repo rates. We think RBI will refrain from giving a point forecast for growth at this meeting too. We expect growth contraction of around 5.7% in the fiscal year ending March 2021, with downside risks. We think the RBI will look through the temporary inflation spike and focus on supporting growth and boosting lending as it did in May. At most, we think the inflation spike could limit the prospects of a more aggressive cut.”

HSBC

“We continue to expect the RBI to stay accommodative and ease pressure on bond supply by maintaining adequate liquidity and using tools such as Operation Twist and Open Market Operations, at appropriate times.” 

Barclays

“High inflation has added confusion to the Reserve Bank’s policy outlook, but given the state of aggregate demand, we forecast the RBI will continue easing, by cutting the repo rate at least 25bp at this policy review. When thinking of how much policy support is enough, historical lessons can be useful. In 2009, when RBI chose to stop its easing cycle in April, RBI Governor Duvvuri Subbarao stated that his first priority remained arresting the decline in GDP growth. Through the peak crisis period between September 2008 and March 2009, the RBI injected Rs 3.9 trillion (7% of GDP), lowered the reverse repo rate (the operating rate) to 3.25%, and provided ample liquidity in both the foreign exchange and money markets.”