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HomeUncategorizedMacro-economic indicators favour rate cut by RBI: Bankers

Macro-economic indicators favour rate cut by RBI: Bankers

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With inflation under control, bankers believe that macroeconomic indicators are conducive for a further rate cut of 0.25 percent by RBI tomorrow, even as some expect the central bank to maintain a status quo.

The improving fiscal situation, in the wake of a record Rs 22,577 crore garnered from CIL stake sale, and weakness in manufacturing sector are among pointers towards a possible cut in rates, experts said.

However, some bankers said the RBI Governor Raghuram Rajan may go for a status quo and would like to wait for cues from the Budget presentation on February 28 before undertaking any rate cut.

RBI, which last month announced a surprise rate cut of 25 basis points after maintaining a hawkish monetary stance for 20 months, is scheduled to undertake its sixth bi-monthly monetary policy review, 2014-15 on Tuesday.

According to bankers and economists, there is room for further rate cut by RBI as retail and wholesale inflation rates have remained benign.

The concerns on fiscal deficit front have also eased, especially after the government last week garnered a record Rs 22,577 crore through disinvestment of 10 per cent stake in Coal India Ltd.

While lowering the policy repo rate to 7.75 per cent from 8 per cent, RBI had also said on January 15 that further rate cuts would depend on inflationary expectations and improvement in the fiscal situation.

“My expectation is that the RBI may go for status quo as no new data have come post January 15. RBI Governor would like to wait till Budget before taking any action on rate front,” Bank of Maharashtra Chairman and Managing Director Sushil Muhnot told.

While the retail inflation slipped to 5 per cent in December, the Wholesale Price Index (WPI) inflation remained near zero level (0.1 per cent).

The government’s fiscal situation is expected to improve further with more disinvestments.

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