RBI's next repo cut on it's way! Rising inflation, slow IIP growth prompt RBI of a more round of rate cut

News Bharati    13-Sep-2019
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Mumbai, September 13: Driven by costlier food items, retail inflation has inched up to 10-month high of 3.21 per cent in August but has maintained to remain within the RBI's comfort level, prompting the central bank for one more round of rate cut.

 
This is probably after another set of government data yesterday revealed that industrial production growth had slowed to 4.3 per cent in July. The National Statistics Office on Index of Industrial Production (IIP) showed that slowdown in factory output was mainly due to the poor show by the country's manufacturing sector.
 
The industrial output growth was recorded at 1.2 per cent in June and 4.6 per cent in May this year. According to data released by the Ministry of Statistics and Programme Implementation, industrial output grew at 3.3 per cent in April-July period this fiscal, down from 5.4 per cent growth in the same period a year ago.
 
With this it will be wise if we continue to expect the RBI's Monetary Policy Committee (MPC) to reduce the repo rate by 15-25 bps in the October 2019 policy review, given the continuing concerns related to economic growth.
 
The RBI, which mainly factors in CPI for arriving at its bi-monthly monetary policy, has been mandated by the government to ensure that inflation remains at 4 per cent, with deviation of 2 per cent on either side. The central bank, which has already reduced the key policy rate four times in the current calendar year, is scheduled to announce its next bi-monthly monetary policy on October 4.
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