Nomura predicts RBI to cut repo rate by 25 basis points

FP Archives December 20, 2014, 10:34:46 IST

Nomura predicted that the RBI will cut the repo rate by 25 basis points in its June 18 policy meeting following the RBI’s deputy governor’s statement that there’s room for rate cuts.

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Nomura predicts RBI to cut repo rate by 25 basis points

Nomura expected RBI to cut the repo rate by 25 basis points at its June 18 meeting, joining the growing chorus predicting the RBI will ease policy this month.

Nomura cited “continued weakness” in domestic demand and “moderate” core inflation as key factors behind call.

Nomura said that it expected a total of 50 bps in cuts for calendar 2012, with a second easing move coming in the second half. It had previously expected just one 25 bps rate cut this year, after RBI lowered rates by 50 basis points in April.

Investment banks see a 20 percent probability of a 50 basis points cut in June

Nomura said that it does not expect a cut in the cash reserve ratio in June as liquidity conditions closer to RBI’s comfort zone. It also added that RBI can purchase bonds via open market operations to address the “liquidity mismatch.”

Reuters

Written by FP Archives

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