There is a better than even chance that the Reserve Bank of India (RBI) will cut interest rates at its policy meeting on September 29 thanks to inflation striking a record low, according to a Reuters poll, marking a shift in expectations from earlier.
The median from survey of 21 economists showed a 60% chance that the central bank would cut its policy repo rate from 7.25% at the next meeting, whereas a previous poll in July had shown a move was more likely in the final three months of the year. Since then, India has released consumer price data for July that showed retail inflation at a record low of 3.78%, giving the RBI more room to ease policy.
Stating that the country will outperform emerging market peers in the current volatile environment, German brokerage Deutsche Bank on Friday said it expects RBI to slash key rates by 0.25% in the September 29 review. “We maintain our view that RBI will most likely cut the policy rate by 0.25% on September 29. Growth-inflation dynamic will continue to remain favourable for RBI to justify a rate cut,” it said in a note.
The RBI has cut rates thrice by a cumulative 0.75% this year. With positive inflation data emerging, pressure has been increasing to cut lending rates further, which can boost the recovery.