The Reserve Bank may go for a “tokan cut” in interest rates in its upcoming policy review on February 3, a report by banking major SBI said.
“We continue to maintain that the first rate cut could happen any time after the Budget, though the probability of a token cut on February 3 may have increased. We are pencilling in a 75 basis point rate cut in 2015,” SBI Chief Economist Saumya Kanti Ghosh said here today in a report titled ‘Triple Macro Bonanza’.
The report said that 5 per cent consumer price index-based inflation and 0.1 per cent WPI prints in December are a positive surprise, leading to a strong possibility of March retail inflation coming in at 5.5 per cent, which is lower than the 6 per cent mean inflation target set by the RBI.
Ghosh said that he has based his belief on lower inflation to the SBI’s Corporate Pricing Power Index which is at a five-year low now, while the SBI Pass-through Index is at a 5.5-year low.
“With global commodity and oil prices continuing to be benign, it is understood that the pass-though index could head even lower in the coming days. This will have a positive impact on SBI corporate pricing power index, and hence the entrenched disinflationary impetus should continue,” he said in the report.
Though he termed the surprise jump in the November IIP numbers at 3.8 percent, as “positive”, it still shows that consumer sentiment continues to remain weak and declining bank credit reveals a spot of bother.
Noting that consumers’ leverage is increasing, he noted in the report that total credit card outstanding has reached the Rs. 295 billion-mark, which is the highest since the December 2008 level.
This is despite the overall low credit growth in the economy, the report said.