RBI faces calls to do more than just one rate cut amid economic slowdown

International News

India's central bank is poised to deliver its fourth successive quarter-point interest rate cut on Wednesday, amid calls from investors and the government for further easing as a slowdown gripping the economy becomes more pervasive.
The Reserve Bank of India will lower the benchmark repurchase rate by 25 basis points to 5.5 per cent, according to almost all of the 36 economists surveyed by Bloomberg. Swap markets are pricing in at least another 50 basis points of reductions before the end of 2019.
Finance Minister Nirmala Sitharaman has ratcheted up pressure on the six-member monetary policy committee for a "significant cut" to lift economic growth from a five-year low. Inflation that's stayed below the central bank's 4 per cent medium-term target for 11 months in a row and the Federal Reserve's first rate cut since the financial crisis allows room to retain the policy makers' easing bias.
A quarter-point cut will take the benchmark rate to the lowest since April 2010. With price pressures anchored, the central bank may have the leeway to keep rates lower for longer.
"We expect 75 basis points of additional rate cuts spread over August, the fourth quarter of 2019 and the first quarter of 2020, taking the repo rate to 5 per cent by March 2020," said Pranjul Bhandari, chief India economist at HSBC Holdings Plc in Mumbai. The headline inflation will stay below the RBI's medium-term target for the "foreseeable future" due to a lack of underlying price pressures across sectors, she said.
Data dependent

 Policy action will be data-dependent, RBI Governor Shaktikanta Das said in an interview last month, while suggesting that the MPC has already delivered 100 basis points worth of easing as...Read More