RBI expected to pivot to rate cuts by year-end after a long pause

Borrowing costs in India have probably peaked, with the central bank expected to start cutting rates by the end of the year



Listen to This Article

By Anup Roy

(Bloomberg) --Borrowing costs in India have probably peaked, with the central bank expected to start cutting rates by the end of the year — that’s the reading of some economists who reviewed the minutes of monetary policy meeting released Thursday.
Economists, including those at Barclays Bank Plc and Nomura Holdings Inc., see the central bank staying on a long pause as high interest rates weigh on demand in the economy. 
“The policy pause will give way to a policy pivot towards rate cuts, starting this October,” Nomura economists Aurodeep Nandi and Sonal Varma wrote in a note. “We expect a sharper cyclical slowdown due to the impact of the global slowdown, combined with the lagged impact of domestic policy tightening,” they said, projecting rate cuts of 75 basis points by March.

The six-member monetary policy committee of the Reserve Bank of India voted unanimously to keep the benchmark policy rate unchanged at 6.50%, but Governor Shaktikanta Das cautioned it was not yet a pivot toward cuts as the fight against inflation was “far from over.” 
While retail inflation fell within its 2%-6% target band for the first time in three months in March, uncertain weather, which could damage crops and fuel prices, is keeping rate setters on the edge. 

Also Read

Nomura hires ICICI banker Mahesh Natarajan to head India ECM biz: Report

Nomura Singapore sells 1.52% stake in CSB Bank worth Rs 61 crore

Nomura hires ICICI Securities' Natarajan to head India ECM business: Report

Market borrowing cost for states remains elevated at 7.83%, says Icra

Barclays silent as JPMorgan distances itself from Epstein-linked Jes Staley

PM Narendra Modi reviews security situation in violence-hit Sudan

Woman shot at Saket court stable, teams formed to nab suspect: Delhi Police

Kejriwal slams law, order in Delhi after woman shot at in Saket court

India no. 1 in digital payments, rural economy is transforming: PM Modi

India's major ports handled highest ever cargo at 795 million tonne in FY23

“It might be difficult for them to opt for more rate hikes if the gradual disinflation process continues as some growth risks could also arise in the latter part of the year,” Citigroup Inc. economists Samiran Chakraborty and Baqar Murtaza Zaidi wrote in a note. Any rate hike now would be “a surprise for the markets,” they added. 

First Published: Apr 21 2023 | 2:39 PM IST

Explore News