By Anirban NagGoldman Sachs Group Inc.
expects Indias central bank to cut interest rates by a quarter percentage point in February, latest to add its voice to a chorus of calls for monetary policy easing.The Wall Street bank said lower inflation projections, and expectations of a slower pace of United States policy rate hikes prompted it to shift its call from a previous forecast of no change in February.The Goldman analysts, led by Chief India Economist Prachi Mishra, still expect Reserve Bank of India to move back to a tightening mode in second half of 2019 as Federal Reserve continues to hike, and food inflation begins to pick up.
Policy tightening is expected to be delayed until fourth quarter and to be shallower -- two hikes rather than three previously, they wrote in a note.The RBI adopted a hawkish policy stance in October, but is widely expected to drop that for a neutral bias at its Feb.
7 meeting as headline inflation consistently undershoots projections and economic growth slows.
Inflation eased to an 18-month low of 2.2 percent in December, below RBIs medium-term target of 4 percent.RBI Governor Shaktikanta Das, who chairs his first Monetary Policy Committee meeting next month, said on Friday that while food inflation had turned negative since October, core measure -- which excludes food and fuel -- remained sticky at around 6 percent, posing a challenge to policy makers.Theres still a significant possibility that RBI could keep rate on hold next month as policy makers gauge progress on fiscal consolidation in interim budget on Feb.
1, Goldman analysts.
The market is pricing in a 100 percent probability of at least a 25 basis points rate cut by June, it said.