RBI may reduce repo rate by 25 basis pts in February

INDORE, India - Jan. 14, 2017 - PRLog -- While indecision prevailing over implementation of GST regime, Reserve Bank of India (RBI) may cut repo rate for the final time by a 25 basis points in the February policy, says HSBS report.

This repo-rate reduction would likely bring the easing cycle to an end, given the pressures of implementation of the GST bill, growing oil prices, implementation of housing allowance of government employees, and the challenging 4% Consumer Price Index (CPI) target for the medium term, HSBC said on Friday.

RBI has set an objective for achieve CPI inflation at 5% by the third quarter of the fiscal year 2016-17 and the medium-term target of 4% within a band of +/- 2%. Retail inflation eased to 3.41% in December, which is a 25-month low as against 3.63% in November. The report said that the RBI will meet its 5% CPI target for March comfortably.

The November Index of Industrial Production increased to 13-month high of 5.7% compared to the contraction of 1.9% in October. The report said, the numbers need to be interpreted with care as the Index of Industrial Production series tend to undergo sharp revisions since more companies report production activity and subsequent revisions could well be downward.

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