Cristian Maggio, Head of EM Research at TD Securities, reviews today’s RBI’s policy decision, and further predicts that India to see a 50bps rate cut in H1, 2015.
Key Quotes
“The statement clarified that the repo rate was held at 7.75%, the Cash Reserve Ratio (CRR) of scheduled banks was kept steady at 4.0% of Net Demand and Time Liabilities (NDTL), while the reverse repo rate remains unchanged at 6.75%.”
“The RBI also announced a reduction of the Statutory Liquidity Ratio (SLR) by 50bp to 21.50% of scheduled commercial banks’ NDTL. While this is a form of quantitative easing, the related expansion of banking sector liquidity will be limited.”
“The January inflation data will be released on February 12-16 and, if figures confirm modest pressure net of the adverse base effects that should push CPI faster in the coming month, Rajan will have another string to his bow. The final one could be the government showing true and measurable commitment to fiscal consolidation. In this case, the RBI will be able to cut rates again without unsettling markets.”
“The next scheduled meeting is on April 7, and that could be good timing for reducing the repo by 25bp.”
“However, as this is a full two months down the line, we think that the RBI may move faster once January inflation is released and consistent with the RBI’s outlook.”
“In total, we continue to expect another 50bp of easing in H1 2015, with the repo and reverse repo rates lowered to 7.25% and 6.25%, respectively.”
Key Quotes
“The statement clarified that the repo rate was held at 7.75%, the Cash Reserve Ratio (CRR) of scheduled banks was kept steady at 4.0% of Net Demand and Time Liabilities (NDTL), while the reverse repo rate remains unchanged at 6.75%.”
“The RBI also announced a reduction of the Statutory Liquidity Ratio (SLR) by 50bp to 21.50% of scheduled commercial banks’ NDTL. While this is a form of quantitative easing, the related expansion of banking sector liquidity will be limited.”
“The January inflation data will be released on February 12-16 and, if figures confirm modest pressure net of the adverse base effects that should push CPI faster in the coming month, Rajan will have another string to his bow. The final one could be the government showing true and measurable commitment to fiscal consolidation. In this case, the RBI will be able to cut rates again without unsettling markets.”
“The next scheduled meeting is on April 7, and that could be good timing for reducing the repo by 25bp.”
“However, as this is a full two months down the line, we think that the RBI may move faster once January inflation is released and consistent with the RBI’s outlook.”
“In total, we continue to expect another 50bp of easing in H1 2015, with the repo and reverse repo rates lowered to 7.25% and 6.25%, respectively.”
