Financial markets and corporates are waiting with bated breath for a cut in the repo rate in the Reserve Bank’s monetary policy on Tuesday. Will Governor Raghuram Rajan bite the bullet and slash key rates?
Tightening Phase: Between March 19, 2010 to April 16, 2012, the RBI hiked the Repo rate by 375 basis points to 8.50 per cent amid global financial crisis.
Easing Phase: The RBI slashed Repo rate by 125 bps between April 17, 2012 to July 15, 2013 when the financial situation improved.
Tightening Phase: Since July 16, 2013, the RBI hiked the Repo rate by 75 basis points to battle inflation.
Rajan’s stance: After taking over in September 2013, Rajan hiked the repo rate by 75 bps in three steps of 25 bps each, reinforcing the anti-inflation stance of the monetary policy.
62% chance of cut
A probability analysis of the Technical Advisory Committee recommendations and RBI’s policy action suggests a two-third chance of a 25-bps rate cut, says Anand Rathi Institutional Research.
China, Euro zone slash rates
China had last week announced a cut in the one-year benchmark lending rate of 40 basis points to 5.60%, the first reduction in more than two years.
European Central Bank has also slashed its benchmark rate by 10 basis points to 0.05% and the deposit rate to minus 0.2% in September.