RBI is expected to cut rate by 0.25 percent as it is all set to easily achieve inflation target
According to reports, RBI is expected to cut rate by 0.25 percent as it is all set to easily achieve the inflation target this fiscal year in view of the centre’s demonetization move that will put additional downward pressure on prices.
According to HSBC, global financial services major inflation momentum remained comfortable for both consumer and wholesale prices and the October inflation print has confirmed that upcoming target of RBI will be easily met.
According to a research note of HSBC, “The government’s newly announced demonetization scheme is likely to put additional downward pressure on growth and inflation over the next year.”
Notably, softening of food prices helped to ease retail as well as wholesale inflation on October, raised the hopes that RBI may go in for another rate cut in its monetary policy review next month.
CPI and WPI also fell for the month. CPI inflation dipped to 14 month low of 4.20 percent in October, while the one based on Wholesale which is WPI fell for the second consecutive month to 3.39 percent for the same month.
Notably, the recent decision of Prime Minister of demonetization of high- demanded currency is likely to lower growth and inflation.
And this has made RBI’s decision to cut the rate upto 25 bps. However, the timing of the rate cut will depend on market volatility around US Fed’s upcoming policy meeting and India’s demonetization scheme.
The next RBI policy review is scheduled on December 7th. In the last RBI policy review which was headed by RBI Governor, Urjit Patel interest rates were cut by 0.25 percent to 6.25 percent.
Prime Minister Narendra Modi on 8th of November had announced that notes of 500 and 1000 will be invalid from now onwards. Since then there is havoc like situation across India.