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The 25 bps cut in repo rate announced by the RBI was on expected lines for most economists. Many of them, however, expect another cut in the second half of the calendar year. Madan Sabnavis, Chief Economist, CARE Ratings, expects an additional 25 bps cut in the policy rates in the second half of the calendar year when a clearer picture on the monsoon, agricultural output and GST implementation would have emerged, and provided the downward trajectory of inflation is sustained.
Radhika Rao, India Economist, DBS Bank, said:“One needs to differentiate between liquidity management and the rate direction, which might, over the course of the coming months, move in opposite directions. Whilst rates might be lowered in response to benign inflation, liquidity might continue to be drained to ensure the operating rate target is close to the policy rate. Ritika Mankar Mukherjee, Economist, Ambit Capital, said she expects the RBI to administer 25-50 bps rate-cut over the rest of FY18. She said, “Even as CPI inflation is expected to trend higher in 2H FY18, we expect the RBI to cut rates from hereon mainly because the government’s net spends have been heavily front-loaded and hence, will slow down from hereon.
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