According to the rating agency Moody, RBI May lower Rates in August. The Moody’s Analytics represents that the hike in CPI inflation was majorly due to base effect.
“We still think the Reserve Bank of India will deliver another interest rate cut in 2015,” Moody’s Analytics associate economist Faraz Syed said in a research note.
The inflation rushed to 5.4% in June that is an eight-month high number. It was 5.01% in May 2015 and 6.77% in June 2014.
“Despite higher CPI inflation, the RBI will deliver another rate cut at its upcoming monetary policy review scheduled for August 4,” it said.
Inflation plays an important role in monetary policy. RBI considers it as a crucial factor. The IIP (Index of Industrial Production) has been slowed down to 2.7% in May from 5.6% It is boosting the demand for a rate cut from RBI.
On the June 2 policy review meet, the RBI had slashed the repo rate by 0.25% for the third time this year to encourage investment and growth. The Repo rate is 7.25per cent after the rate cut in June and the cash reserve ratio (CRR), and statutory liquidity ratio (SLR) is 4% and 21.5%, respectively.
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