Expect a lull after the storm

By: | Updated: August 11, 2016 3:28 PM

RBI is widely tipped to cut repo rate by 25 bps today in the wake of easing inflation and US Federal Reserve status quo on interest rates.

RBI is widely tipped to cut repo rate by 25 bps today in the wake of easing inflation and US Federal Reserve status quo on interest rates. That said, the central bank might go for a prolonged pause thereafter, owing to a divergence in food and core inflation, and even within the services sector. Moreover, monetary transmission has been weak. While the central bank has reduced repo rate by 75 basis points from January till date, the average base rate of six major banks has dropped just 36 basis points even as they have lowered deposit rates by as much as 100 basis points.

 

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