“After front loading the 50 bps rate cut in its last policy meeting, RBI stood pat today. In the accompanying commentary, RBI has decisively focused on domestic factors of improving growth and an anchored inflation trajectory; allowing it to downplay the impact of Fed lift-off likely later this month.
Going forward, I believe RBI will have a scope to ease rates in Q4 as CPI inflation comfortably undershoots the 6.0% Jan-16 target and the Government reaffirms its commitment to fiscal consolidation while embarking on key reforms of Bankruptcy code, UDAY and GST. Meanwhile, I am confident, that economy’s revival and ongoing efforts to clean their balance sheets will offer banks the opportunity to push monetary transmission beyond the 60 bps seen this CY.”