Published On: Wed, Oct 5th, 2016

RBI to continue with easing; next cut in Feb: Analysts

Mumbai, Oct 5: A day after the monetary policy committee (MPC) debuted with a surprise 0.25 per cent cut in rates, analysts today said the Reserve Bank will continue with the accommodative stance but the next action can come only in the February review.

In a note, domestic rating agency Icra said it expects the rate easing cycle to continue.

“With the indication that real interest rates (the differential between the key lending rate and inflation) may need to be lower than 1.50 per cent given prevailing global scenario of negative rates, further easing by the Monetary Policy Committee (MPC) can’t be ruled out,” its senior vice president Karthik Srinivasan said, adding that he is uncertain over the timing.

Economists at foreign brokerage Bank of America Merill Lynch said however that it doesn’t expect any rate cut in the upcoming review of the bi-monthly policy in December.

“We expect a final 0.25 per cent cut on February 7,” it said in a note.

Concurring with this view, Singaporean brokerage DBS also said the next rate cut can happen only in the first quarter of 2017 and not at the next policy review.  

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