Goldman Sachs expects RBI to cut key interest rate by 25 bps on Tuesday

Dec 17 2012, 13:59 IST
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Goldman Saachs predicts a major shift in RBI's stance in its policy review meet on Tuesday. (Reuters) Goldman Saachs predicts a major shift in RBI's stance in its policy review meet on Tuesday. (Reuters)
SummaryGoldman Saachs predicts a major shift in RBI's stance in its policy review meet on Tuesday.

Goldman Sachs expects India's central bank the Reserve Bank of India (RBI) to cut its key interest rate by 25 basis points at its policy review meet on Tuesday after last week's inflation data came well below expectations, and as economic growth remains sluggish.

The investment bank expects another 25 basis point cut in the repo rate in January, according to an email sent to clients on Monday.

Goldman had previously forecast the Reserve Bank of India would cut interest rates by 50 basis points in March.

"With both growth and inflation surprising on the downside relative to the RBI's forecast, there is a reason for the central bank to move earlier than its previous guidance," economist Tushar Poddar wrote in the note.

Data on Friday showed the wholesale price index rose 7.24 percent from a year earlier in November, below expectations for a rise of 7.6 percent.

Core inflation was 4.5 percent.

The country's economy grew 5.3 percent from a year earlier in the July-September period.

A majority of analysts polled expects the RBI to keep the repo rate on hold, with respondents split about whether it will cut the cash reserve ratio for banks.

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