See an outside chance of a rate cut from the RBI today, say bank economists

Reserve Bank of India (RBI) will be announcing its monetary policy today. Soumya Kanti Ghosh, group chief economic advisor, State Bank of India (SBI) and Abheek Barua, chief economist & executive vice president at HDFC Bank shared their expectations from the central bank.

“I think we have to go beyond the usual, the normal, the conventional measures that they use in normal circumstances. I would anticipate some amount of direct buying in the commercial paper market. Some measures that go beyond simply doing repo operations or open market operations (OMOs) and moving into more direct buying of paper of corporates both at the short end and the long end so that the risk aversion that prevails in the market does not impede the flow of funds," said Barua, adding that  the RBI as a central bank is best equipped to absorb the risk without worrying that much about its balancesheet.

When asked if we are going to see unprecedented, unexpected and unconventional steps by RBI, Ghosh replied, “The RBI has to take the unconventional measures. I am expecting some support for the commercial paper market. These are interesting times and from next policies we will have no data on consumer price index (CPI) because given the markets and the CPI reporting mechanism are closed, February could be the last CPI data before the next policy is announced in April and June. We will watch with limited data. We have to look into the concerns of the market and possibly the RBI could go beyond its traditional means.”