RBI May Announce Fifth Rate Cut Of The Year Today: 10 Things To Know

The RBI is predicted to lower its key lending rate by at least 25 basis points to 5.15 per cent, which would take cumulative cuts so far this year to 135 bps, according to news agency Reuters. In the August review, the MPC reduced the repo rate by 35 basis points, following three bi-monthly reductions of 25 basis points each. "After all the measures taken by the government to revive the economy it may be expected that the RBI will reduce rates by 25 bps most probably," Madan Sabnavis, chief economist, CARE Ratings, told NDTV. The RBI currently has an "accommodative" stance on policy which rules out rate hikes in the near term. It switched to the current stance from "neutral" in June. In August, consumer inflation accelerated to a 10-month high of 3.21 per cent, but continued to remain within the central bank's medium-term target of 4 per cent since July 2018. "There is scope for further easing may be up to repo rate of 5 per cent by the end of the year if the economy is sluggish and inflation under control," CARE's Mr Sabnavis added. (Also read: RBI sees retail inflation at 3.5-3.7% in second half of 2019-20) Some economists even expect a bigger rate cut this time around, considering its lower growth forecast. (Also read: Fixing weak growth highest priority, says RBI) "We pencil in a 40 bps of rate cut which should be a signal to the market that the MPC is not quite done as it front loads the remaining couple of rate cuts in the cycle," said Suvodeep Rakshit, vice president and senior economist, Kotak Institutional Equities. The RBI in August lowered its GDP or gross domestic product growth projection for 2019-20 to 6.9 per cent from 7 per cent, underlining the need for addressing growth concerns by boosting aggregate demand. From October 1, the RBI mandated banks to link floating rate loans with external benchmark rates - such as the repo rate - in order to aid better rate transmission, after months of banks passing on very little benefit of the lower key rates to the end-consumer. Credit ratings major Moody's has said the move is credit negative for the banks. A larger rate cut will also help in quicker transmission of lower rates by banks, said Mr Rakshit. The RBI Governor has maintained that future rate cuts will depend on incoming data. "We cannot have lower interest rates like in advanced economies," he said last month.

RBI May Announce Fifth Rate Cut Of The Year Today: 10 Things To Know

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