Expect Another Rate Cut By RBI This Year, Say Experts

Annual retail inflation in the country picked up in March to 2.86 per cent compared with 2.57 per cent in February, government data showed on Friday. Analysts polled by news agency Reuters had forecast that retail inflation will accelerate in March on slightly higher food prices but remain under the Reserve Bank of India's medium-term target of 4 per cent. According to a Reuters poll last week, economic growth is forecast to average 7.2 per cent over the coming year.

COMMENTARY

Gaurav Dua, market research head, Sharekhan, Mumbai:

"Though inflation inched up in March, it would remain well under the Reserve Bank of India's (RBI) comfort level of 4 per cent despite possibility of below-normal monsoons."

"Apart from policy priorities of a new government, the rate cut decision is data-dependent and the data could remain benign."

"Growth slowdown driven by weakness in consumer demand would be an important factor influencing the RBI's monetary stance."

Radhika Rao, economist, DBS Bank, Singapore:

"Pickup in March inflation was close to our expectations. Outcome validates the central bank's move to be confident on a benign inflationary trend, but prefer to stay data-dependent as inflation is expected to grind higher after hitting bottom in January 2019."

"After a neutral cut in April, the door is still open for late-cycle easing in June or August. Oil prices and monsoon strength are two factors that are likely to be watched closely."

Tushar Arora, senior economist, HDFC Bank, New Delhi:

"A modest rise in inflation was on the cards. Some sequential pick-up in food is expected in the summer months. What's comforting is that inflation still remains within the targeted range of the Reserve Bank of India and in line with the trajectory outlined by the central bank. We expect one more rate cut by the RBI this year."

"However, oil prices, fiscal math of the new government and food trajectory during the summer months are some unknown variables and the MPC would like to wait for some time to gain more clarity on these factors before making its next move."

Shashank Mendiratta, economist, IBM, New Delhi:

"While food prices were expectedly a key driver of the uptick in March headline inflation, they still remain benign relative to historical standard."

"The impact of El Nino on monsoon and food prices is a risk going forward though it is too early to worry about it as not all El Nino years have led to a spike in inflation in the past."

"The central bank will also focus on aiding growth amid downside risks especially weak global demand."

"Overall, inflation remains benign and well below the RBI's inflation target of 4 per cent. This is the eighth consecutive month where CPI undershot RBI's inflation target."