Despite IIP surprise, RBI to cut rates on Tue: Foreign analysts
Credit Suisse Director Robert Prior-Wandesforde in a note said he still expects the monetary authority to slash the repo or short-term lending rate next Tuesday.
"We doubt that either of today's data releases (IIP and retail inflation) will prevent the RBI from cutting the repo (and cash reserve ratio) by another 25 bps March 19, while we are also looking for a 25 bps reduction on May 3," Prior-Wandesforde said.
Explaining the rationale for this optimism, he said the disappointing Q3 GDP data of just 4.5 per cent, and the fact that Finance Minister P Chidambaram has stuck to his budgetary commitments are likely to carry more weight in the context of a WPI rate, which is trending lower.
While the January industrial production rose 2.4 per cent mainly due to perk up in manufacturing output and enhanced power generation, against 1 per cent a year ago, the retail inflation rose to 10.91 per cent in February from 10.79 per cent in January, dampening markets, which shed 0.41 per cent or 81 points today.
For the April-January period of this fiscal, the IIP print stands at a poor 1 per cent, down from 3.4 per cent a year ago.
However, the RBI mostly bases it inflation reading on the wholesale price numbers, which
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