Expect 25 bps cut by RBI in next policy, 50-65 bps over next one year, says JPMorgan

The Reserve Bank of India is likely to cut the repo rate by another 25 basis points (bps) in the October monetary policy, said Luis Oganes, global head - Emerging Markets Research, JPMorgan. He added that 50-65 bps cut is expected in the key rate over the next one year. One basis point is a hundredth of a percentage point.

“We are expecting a 25 basis points rate cut in October policy and we think over the next year maybe there is a range of 50-65 basis point rate cuts,” he said, adding "we hope that would help stabilise the deceleration trend in India".

He said India is not different from many other central banks in EMs where there is more monetary space but no fiscal space to support growth.

Talking about the US Federal Reserve cutting rate by 25 bps, Oganes said it is clear that the Fed is concerned about the growth dynamics even though the US is not going into recession.

"Moreover, for most places there is no inflation problem and so there is an opportunity for EM central banks to also do the same and help growth. So we should see this as good news," he said in an interview with CNBC-TV18.

Talking about the oil price outlook, he said some risk premium will have to be priced in because "everyone can see how easy it is to disrupt global oil supplies. It may not happen there but it could happen somewhere else, so the risk premium needs to be priced-in".

On global growth, he said, “Unfortunately global growth is decelerating pretty much everywhere. The US, to give the Fed some credit is one economy within the developed world, is still doing better. We think it is going to decelerate from 4 percent, which was the peak of growth in second quarter of last year, to around maybe 1.5 percent by the end of this year.”