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Indian central bank likely to cut rates

Mumbai, June 18, 2012

The Reserve Bank of India (RBI) releases its mid-quarter monetary policy review today, and weakening domestic and global economic conditions have added to the likelihood it will take action to boost growth, despite lingering inflation worries.

India reported headline inflation at 7.55 per cent in May, in line with expectations, which however, under ordinary circumstances would keep the RBI focused squarely on controlling prices.

A poll last week showed most economists expect a repo rate cut, but few expected a cut in the cash reserve ratio. Expectations have grown since then for a CRR cut.

Many market participants are betting on a modest reduction in both the repo rate and CRR because the combination of interest rate and liquidity easing would send a signal that the RBI is keen to prop up growth by providing liquidity to banks while ensuring inflation is under control.-Reuters




Tags: inflation | Interest rates | RBI | Indian central bank |

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