Consensus for 25 bps rate cut, 'accommodative' stance

Mumbai: The Reserve Bank of India-led Monetary Policy Committee is likely to cut repo rate by 25 basis point to 5.50 per cent, the fourth cut in a row, while maintaining the “accommodative” stance due to persistent concerns on economic growth, a poll showed.

MPC led by RBI Governor Shaktikanta Das, which is on a three-day meeting, is scheduled to release the policy statement of bimonthly monetary policy meeting at 11:45 a.m. on Wednesday.

"We believe MPC members may cut repo rate by 25 basis points (bps) on the back of worsening growth and weak consumption and expenditure," said Kanika Pasricha, Economist with Standard Chartered Bank.

On similar lines, Indranil Pan, Group Economist with IDFC First Bank, said, "A 25 bps rate cut is expected considering continued slowdown in growth and globally all major central banks easing monetary policies.”

Experts see the slowdown of global economic growth and lack of impetus in domestic inflation as reasons for a 25 bps rate cut.

Out of 22 respondents polled by Ticker News, 18 financial institutions expect the central bank to keep its policy stance to be "accommodative" and see room for cumulative 50 basis points rate cut in the remaining financial year.

The RBI has cut its repo rate by 25 bps points in its June 6 meeting to 5.75 per cent.

Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank, said, "There is scope for a cumulative 50 bps rate cut in coming months along with a 25 bps rate cut this time. Stance will remain accommodative and growth forecast may be downwardly revised as there are downside risks to the country's growth," said.

Seconding this view, Kavita Chacko, Senior Economist with Care Ratings, said, "RBI stance may remain "accommodative" as inflations remains soft and liquidity is quiet comfortable, making room for further easing in coming months."

Most economists that Ticker-News talked expect a downward revision to growth outlook to 6.5-7 per cent from 7 per cent, considering tepid growth on the domestic front and the slowdown in the global economy.

According to Central Statistics Office (CSO), India's GDP growth fell to 6.8 per cent in FY19 compared to 7.2 per cent in the previous financial year, while on a quarterly basis GDP fell to 5.8 per cent in Q4 FY19 from 6.6 per cent in a quarter prior.

Recently, Crisil has cut India's GDP growth outlook to 6.9 per cent this fiscal year from 7.1 per cent.

— TickerNews Service