'Rate cut likely in March if budget addresses fiscal issues'
"The RBI is likely to take some comfort from the decline in WPI inflation. In turn, this has increased the odds of another rate cut in March, if Delhi continues to deliver its bit," HSBC said in a research note.
"The delivery of a credible budget targeting fiscal consolidation and a continuation of the structural reforms push...remain important pre-conditions for monetary easing," HSBC said.
The wide current account deficit is another important consideration for monetary policy deliberations, it added. WPI inflation in January hit 3-year low of 6.62 percent.
In its January 29 policy review, RBI after a 9-month long hawkish monetary policy stance, slashed its key interest rates by 0.25 per cent.
"The RBI will, therefore, continue to tread carefully," HSBC said, adding that there still are pent-up inflation pressures in the economy that are not fully reflected in either the WPI or the CPI.
Subsidised fuel and other administered prices yet to be fully adjusted to reflect international commodity prices. It added. "The expected 50 paise monthly adjustment in diesel prices will add to the inflation print, although only in a phased manner," HSBC said.
Led by oil and gold imports, current account deficit (CAD) which occurs when a country's total imports of goods,
services and transfers is greater than the country's total export of goods, services and transfers
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