RBI to retain dovish bias going forward: DBS report
The Reserve Bank of India is expected to retain a dovish bias going forward and its emphasis may switch towards ensuring that the aggressive rate cut this year gets transmitted to commercial lending rates, says a report.
After five consecutive cuts in interest rates this year, the six-member Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, unanimously voted to hold the key repo rate at 5.15 percent and reverse repo rate at 4.90 percent.
“We think that the RBI will retain a dovish bias, but the emphasis may now switch towards ensuring that the aggressive rate cuts this year (cumulative 135bps) gets transmitted to commercial lending rates,” Singapore’s DBS banking Group said in a research note.
The RBI reiterated that it would maintain an accommodative stance as long as necessary to revive economic growth but cut its GDP growth forecast to 5 percent for the 2019-20 fiscal from the earlier estimate of 6.1 percent.
Das said the pause was temporary and the central bank wanted to assess the effect of its policy after reduction of 135 basis points in five policies this year.
The report further noted that the macro mix for India has deteriorated further lately, with the RBI revising FY 2019/20 growth down to 5.0 percent (6.1 percent previously) while bringing its CPI forecasts for H2 FY2019/20 up to 5.1 percent (4.7 percent previously).
There appears to be a bit more concern on rising food prices and inflation expectations, noted DBS.
“The RBI pause appears broadly in line with what major central banks across the world (in the including the Fed) has been communicating,” said DBS.Are you happy with your current monthly income? Do you know you can double it without working extra hours or asking for a raise? Rahul Shah, one of the India’s leading expert on wealth building, has created a strategy which makes it possible… in just a short few years. You can know his secrets in his FREE video series airing between 12th to 17th December. You can reserve your free seat here.