India: RBI to keep the repo rate unchanged at 6.25% - TDS

Today the RBI will announce the second bi-monthly monetary policy decision of 2017 and analysts at TDS are in line with the almost unanimous consensus, and expect the MPC to keep the repo rate unchanged at 6.25%.

Key Quotes

“We also expect the reverse-repo to remain pegged 25bps below the repo at 6.00% as further compression of the spread would collapse the two rates onto one and de facto suppress the corridor. We do not foresee any change of the CRR steady at 4.00% since early 2013. With CPI reaching a low point at 2.99% in April on lower food prices and weak domestic demand, there’s no need for the RBI to look for policy normalization anytime soon.”

“In fact, we do see scope for a potential last cut later on in the summer if economic weakness lingers and inflation remains well behaved. This, however, will be highly dependent on the volume of precipitations; so far, the start of the summer monsoon looks promising for tame inflation.”