INSUBCONTINENT EXCLUSIVE:
Minutes from the Reserve Bank of India's August meeting have revived expectations for further policy easing as headline inflation is
likely to remain within target over the next one year, says a DBS report
According to the report, pro-growth Reserve Bank of India (RBI) minutes are expected to cap bond yields
"INR 10Y (generic) government bond yields are likely to stay below 6.7 per cent after RBI minutes revived expectations for further policy
easing," Radhika Rao, economist, and Eugene Leow, rates strategist at DBS Group Research said in the report
Weakening growth was a dominant worry for policy makers amid weaker global activity, they noted."With RBI projecting inflation at below
target over the next four quarters, the door for cuts remains open
We suspect further downward growth revisions might trigger further rate response," the DBS report said.The report, however, cautioned that
"the debate over remaining policy space is beginning to surface" after 110 bps cuts already undertaken and another likely in the fourth
quarter (4Q).In an unusual move, the Reserve Bank of India (RBI) on August 7 had reduced the benchmark lending rate by 35 basis points to
5.40 per cent amid concerns over slowdown in economy
Before this, the RBI had reduced the rate thrice, each time by 25 basis points."Transmission will be accorded the highest priority, as the
RBI's moral suasion attempts, surplus liquidity and consideration of an external benchmarks nudged banks to act," the DBS report
noted.While the RBI has lowered the repo rate by 1.1 percentage points in 2019, the banks are yet to pass on the entire benefit of lower
interest rate to borrowers.RBI Governor Shaktikanta Das recently asked all banks to link their interest rate with repo for faster
transmission of the central bank's policy actions.Get Breaking news, live coverage, and Latest News from India and around the world on
TheIndianSubcontinent.com
Catch all the Live TV action on TheIndianSubcontinent 24x7 and TheIndianSubcontinent India
Like us on Facebook or follow us on Twitter and Instagram for latest news and live news updates.
