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The Reserve Bank of India (RBI) may have kept interest rates unchanged on Wednesday, but has certainly prepared the ground for a rate-cut on August 2, say economists and bankers.
“Perhaps fearing risks to credibility if it reverses its earlier hawkish stance too abruptly, the RBI preferred to stay on hold, while opening the possibility of return to easing at August,” said Abhishek Gupta, a Bloomberg Intelligence Economist.
The latest monetary policy stance has opened up room for a 25-50 basis point cut in repo rates in the second half of this year, said bankers.
“The large cut in inflation projection by the RBI in the monetary policy is in consonance with ground realities and is likely to create room for rate cuts in the latter half of the year,” Arundhati Bhattacharya, Chairman, State Bank of India, said.
Richa Gupta, Senior Economist, Deloitte in India, said that given the inflationary dynamics and growth trajectory in the current year, there is a likelihood of another cut premised on continuing sluggishness in the growth momentum and sustained lower levels of inflation.
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