INR: Stubbornly low inflation gives the RBI a window of opportunity to cut - ING

The Reserve Bank of India’s MPC meet today (1000 GMT) with expectations for a 25bp cut to the repo rate fairly rife, according to Viraj Patel, Research Analyst at ING.

Key Quotes

“Both local equity markets and the INR have been supported by greater easing hopes, which have been fuelled by recent dis-inflationary trends in the economy. Indeed, the Jun CPI inflation reading came in at 1.54%, well below the 4% target and in fact falling below the +/- 2% tolerance band for the first time. However, we do note that a rate cut today isn’t a sure-fire thing given the RBI’s focus on tackling the large number of nonperforming loans (NPLs) in the banking system; a higher real interest rate may be desirable.”