The Reserve Bank of India (RBI) is expected to keep the repo rate at 6% after cutting it by 25 basis points at its last meeting, says Moody’s. That vote was 4-2. Declining prices of key rural commodities are primarily the cause for the disinflation trend.
Although food prices are expected to rise over the coming months due to base effects, the forecast of normal rainfall for the monsoon season will likely keep a lid on overall food prices.
Further, India’s growth is decelerating. Demonetisation has disrupted the informal sector of the economy, but investment has also been moribund. Because of low growth and inflation, the RBI will keep an easing bias.
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