As the policy review meet is scheduled for next week, the Reserve Bank of India may cut repo rate by 25 basis points (bps) to rebound from economic disruption after the demonetization move, as per the expectation from many economists in a poll conducted by Reuters.
On Nov 8, Modi made a historical announcement to ban high value notes to fight tax evasion, corruption and fake notes. This move strongly impacted many of the consumer spending accounts including farmers, households, job holders and even companies. Such effect could result in economic slowdown and low inflation which had prompted RBI to cut down repo rate in December but the central banks kept the rate unchanged it waited to see the full effect of demonetisation.
In the Reuters poll, almost 46 economists expected that the RBI would cut repo rate to 6 per cent as to provide more support to the country’s growth rate. However, Citigroup believes that the rate cut will more likely to be happened rather in April as fiscal deficit target and smaller market borrowing are positive for rates.
Source: ET Realty