Ahead of the Reserve Bank of India’s (RBI) quarterly monetary policy review, investors and market analysts are wondering which way the pendulum will swing on July 31. The RBI is grappling as it tries to increase its foreign capital inflows and build up its reserves that have fallen substantially in the recent period due to market intervention.
As the debates continues as to whether or not it must loosen interest rates, CNBC-TV18 spoke to two experts - Manish Wadhawan, HSBC and Samiran Chakrabarty of Standard Chartered Bank, if they were expecting a non-event policy or if they felt the RBI may choose to surprise.
While Wadhawan finds the probability of a rate cut high and is expecting the central bank to surprise the market with a 25 basis points rate cut, Chakrabarty isn’t holding out for a move as he doesn’t see an interest rate cut getting the economy back on the fast track to growth.
RBI had opted to hold rates in the mid-quarter policy review in June, citing upside risks to inflation. Our economic environment meanwhile continues to take a whack due to a lacklustre monsoon so far this year. Inflationary pressures as well as a crumbling rupee continue to pose a threat.
The RBI has projected inflation to be around 6.5% by March 2013, with a caution that it will remain sticky and that there was a need to arrest the decline in economic growth.
HSBC roots for rate cut; StanChart sees no change to growth
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