India to keep interest rates as they are, despite slowing
India's Reserve Bank is expected to keep interest rates unchanged at its forthcoming monetary policy committee meeting
India’s central bank Reserve Bank of India (RBI) will be holding its monetary policy committee meeting on Wednesday and analysts don’t expect any change in interest rates despite sluggish economic growth.
As per the recently released GDP numbers for the March quarter, India’s growth rate slipped to 6.1% in the January-March quarter and 7.1% during 2016-17. The consumer price index-based inflation rate also eased to 2.99% as food prices moderated and this trend is expected to continue due to stable crude prices and with weathermen forecasting good monsoon this year.
Japanese financial services major Nomura expects the RBI to stay on hold till March 2018 and thereafter go for a cumulative 50 bps rate hike starting in April 2018, reports PTI.
Nomura noted that the GDP data should make it amply clear that “both growth and inflation signals are still reeling under the effects of demonetization of high value currency notes, which are transitory, and it is best to wait for data to stabilise before making any judgement”.
In a poll conducted by Business Standard newspaper, 12 economists ruled out a rate cut by the central bank even as growth numbers slowed down and inflation remains low.
“Not many are thinking of a rate cut at this point. It should be a pause,” said Kaushik Das, India economist at Deutsche Bank, according to the daily.
The RBI had last cut its repo rate or the repurchase rate (the interest rate at which it lends funds to banks to overcome short-term liquidity mismatches) from 6.50% to 6.25% in the October 2016 policy review. Since then, there have been three policy reviews, but the central bank has kept its policy rate steady.