RBI likely to cut rate by 25 bps on Mar 19, says HSBC
The central bank may further reduce repo rate by 25 bps on Tuesday and make another equal cut in the second quarter of 2013, taking the policy rate to 7.25 per cent from the current 7.75 per cent, HSBC said in a report today.
"While growth is stabilising, the RBI is likely to see it as too low for comfort. At the same time it is getting slightly more comfortable with inflation outlook. Coupling this with the government's delivery of a relatively credible budget targeting further consolidation, this is likely to encourage RBI to cut policy rates by 25 bps again next week.
Another is likely to follow in Q2, but that may be the end of the easing cycle," the report said.
However, positive IIP numbers and a disappointing retail inflation numbers at 10.9 per cent yesterday tempered hopes of a rate cut in the broader markets -- equities and bonds.
A Nomura report has said the brokerage expects the Reserve Bank to deliver next repo rate cut on May 3, not March 19.
According to HSBC, the central bank is likely to justify the rate cut with the easing in core inflation and the expectation that inflation will decline further during 2013.
It also said the apex bank is also likely to partly base its decision on the government's
Be the first to comment.