RBI likely to cut rates by 25bps in Aug

The Dollar Business Bureau

The Reserve Bank of India is expected to cut key rates by 25 basis points in a policy review meeting, which is scheduled on August 9.

The rate cut owes to benign inflation, low IIP growth and monsoon forecast, claims a report.

According to the largest global financial service provider, Bank of America- Merrill Lynch (BofA-ML), easing of 25 basis points is expected as CPI inflation stands below the expected 4.8% for March while in February the IIP rose to a mere 2%.

Earlier in April, RBI lowered its policy rate to 6.5%- the lowest rate in past five years. While that was the first rate cut after a gap of 6 months, RBI reduced its rate by an aggregate of 1.5% since January 2016. Subsequent rate cuts from RBI are expected to boost investments in the industry.

Ideally CPI should stand at around 5% in FY17, excluding  the rise in inflation due to hike in oil prices from a lower point or due to a hike in housing costs as a result of the policies announced by the Govt in its 7th pay commission.