RBI likely to cut key policy rates by 0.25% on Mar 19: Experts
Taking cue from declining core inflation levels and sluggish growth trends, the Reserve Bank of India is likely to cut key policy rates by 0.25 percent in its mid-quarter review on March 19, global investment banking majors have said.
Even if RBI cuts rates on Tuesday, the tone of monetary policy guidance is unlikely to change significantly, they said, adding that policy guidance is likely to be "cautious".
According to global banking giants HSBC, Standard Chartered, Citigroup, Barclays and Credit Suisse, RBI is likely to slash the repo, or short-term lending, rate in its review meeting.
The factors that are likely to act in favour of a slash in rate cuts include a narrower February trade deficit, adherence to the fiscal deficit target in FY 2013, a slowdown in GDP growth to decade-low levels, and a fall in core inflation to below 4 per cent for the first time since April, 2010.
"Though wholesale price-based inflation at 6.84 per centin February was marginally higher than expected, we maintain our view of a 0.25 per cent reduction in the repo rate to 7.50 per cent next week," Standard Chartered economist Anubhuti Sahay said in report.
Barclays Capital economist Siddhartha Sanyal in a research note said that "if the increase in LPG and diesel were not implemented, then we estimate that WPI inflation for February would have been close to 6.3 per cent, underpinning the downward trajectory that started in October 2012".
Citi India Chief Economist Rohini Malkani said: "We maintain our view of a modest 0.50 per
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