homeeconomy NewsIf you are hoping for RBI to cut interest rate in October, you'd be disappointed, say these economists
If you are hoping for RBI to cut interest rate in October, you'd be disappointed, say these economists
In an interview with CNBC-TV18, Kaushik Das, Chief Economist at Deutsche Bank said that those who were expecting rate cuts to begin in October will be disappointed.
While the Reserve Bank of India (RBI) has kept interest rates unchanged, the signs aren't encouraging for those waiting for a fall in repo rate, which is the interest paid by banks for funds borrowed from the central bank.
Many experts are of the view that the increased emphasis on curbing inflation to the RBI target of 4 percent may mean that the rate cuts, if any, will come later than what most people had anticipated until now.
In an interview with CNBC-TV18, Kaushik Das, Chief Economist at Deutsche Bank said that those who were expecting rate cuts to begin in October will be disappointed. “The consensus is for a 6 percent growth this year, RBI is for 6.5. But if RBI’s forecasts are met, then the logic for rate cuts get pushed back and probably in April of next year is when you could expect RBI to start cutting rates and we have a prolonged extended pause for now,” he added.
Das is not alone. Even Amandeep Chopra, Group President & Head-Fixed Income, UTI MF and Ashwini Kumar Tewari, MD-Risk Compliance & Sarg, at the State Bank of India, were of the view that February 2024 is the earliest that one can expect a cut in benchmark lending rates by RBI.
Repo rates are the rates to which bank loans, for everything from home loans to auto loans and corporate loans, are benchmarked. So, for banks to cut their interest rates, RBI will have to take the lead.
The cautious commentary was triggered by Governor Das, who said that it is important to maintain an 'Arjuna's eye' on inflation, in his address post the latest monetary policy review. The reference is to a tale from the Mahabharata, part of the Indian mythology, where the protagonist Arjuna's ability to hit his target has become a standard for determination, concentration and skilled marksmanship.
Das repeatedly citing the target of 4 percent for retail inflation, and not highlighting the 2 percent wiggle room (i.e. up to 6%) that the inflation targeting framework allows him, is being a seen as a sign of RBI turning more hawkish than what the market had budgeted for.
Following the commentary from the RBI Governor, the morning enthusiasm in the Indian equity markets made way for an afternoon sell-off. Both Nifty 50 and Sensex slipped sharply from the day's high. Nifty Bank, the index of the country's biggest banking stocks, which looked set to cross its all-time high was down more than 200 points from the day's high. Real estate stocks, which are sensitive to lending rates, saw a sharp dent.
For more details, watch the accompanying video
(Edited by : C H Unnikrishnan)
First Published: Jun 8, 2023 12:34 PM IST
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