Even as the economy struggles with growth slowdown and sees low inflation, the expectations of another rate cut by the Reserve Bank of India have fuelled further at its next Monetary Policy Committee (MPC) meeting on August 7. The analysts are expecting the RBI to cut the repo rate in the range of 25-50 basis points. The MPC meeting begins Monday and the resolution will be put in public domain on August 7, 2019. The RBI had slashed rates three times so far in this calendar year. With the repo rate having been reduced by 75 bps from 6.5 per cent to 5.75 per cent over the last three meetings, it is still to be seen how the central bank proceeds this time. However, the transmission of rate cut benefits by banks has been slow so far.
“Since the last policy, data and trends emerging indicate that inflation continues to be stable and is trending on the lower side. Further, growth has been muted on account of visible consumption slowdown as well as subdued investment outlook”, Shanti Ekambaram, president–consumer banking, Kotak Mahindra Bank, said. Adding, the analysts said that the recent uptick in monsoon rains should provide boost to the agriculture and revive the consumption scenario to some extent in rural India.
ICRA is expecting a rate cut by the MPC in this bi-monthlypolicy review with retail inflation well below the 4% medium term target and a variety of growth indicators pointing to a slack in economic activity and sentiment, Aditi Nayar, Principal Economist, ICRA had earlier told Financial Express Online.
“In our view, the RBI should ideally front-load a 50bps rate cut at its forthcoming meeting on 7 August, but the RBI governor’s recent interview suggests a more measured approach. Hence, a 25bps rate cut looks more probable,” Edelweiss Research said in a report.