HSBC sees inflation below RBI’s 2017 target, room for rate cut

HSBC sees inflation below RBI’s 2017 target, room for rate cut

FPJ BureauUpdated: Thursday, May 30, 2019, 12:21 PM IST
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New Delhi :  Inflation is likely to remain below the Reserve Bank’s early 2017 target of 5 per cent for the next 12 months, opening up space for monetary easing, says an HSBC report.

According to the global financial services major, the declining trend in inflation is expected to continue as new crop streams into the market and CPI inflation could fall to under 4.5 per cent in January-March 2017. Moreover, vegetable prices are expected to completely reverse their summer ascent and higher pulse production may reduce inflation by another 40 bps.

“RBI has two objectives – to reach its 5 per cent inflation target in early 2017 and keep real rates at the 1.5-2 per cent range. Marrying the two would open up space for easing by 50 bps,” HSBC said.  HSBC expects a 25 bps rate cut at both December and February policy meetings.

The next policy review meet is scheduled to be held on October 4.It will also be the first review under new RBI Governor Urjit Patel, who has assumed charge effective September 4,after the end of his predecessor Raghuram Rajan’s three-year tenure.

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