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State Bank of India sees Reserve Bank of India cutting policy rates only after February 2015.
The central bank may go for a rate cut in a decisive manner (50 basis points or so) post February, Saumya Kanti Ghosh, Chief Economic Advisor of SBI Group, said in a research note issued after the release of WPI numbers for November.
However, the policy rate cut would happen only when the RBI is convinced that the consumer price index (CPI) based inflation’s downward trajectory is sustained and inflationary expectations are anchored decisively lower.
Investment revival still remains elusive, the SBI report has said.
On Monday, the wholesale price index (WPI) inflation for November 2014 came in at ‘zero’ per cent level, much lower than 1.77 per cent in October.
Retail inflation for November had cooled to 4.3 per cent from 5.52 per cent in previous month, official data released recently showed.
SBI has slightly different take on the perceptions in certain quarters that the base effect is pulling down both CPI and WPI inflation.
“It is naïve to say that base effect is pulling down retail as well as wholesale inflation, as the impact is being felt only from November 2014 onwards”, the SBI research report said.
However, the good thing is SBI is looking at sub 6% retail inflation in March 2015 itself.
Core CPI and headline CPI are likely to converge below 6 per cent in March 2015. WPI is likely to be sub 1 per cent by March 2015, SBI has said.
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