Expect 50 bps repo rate cut by RBI only in H1FY25; USD-rupee to be in 81-82.50 range: Standard Chartered Bank economist
US Federal Reserve raising interest rates to a 22-year high level, says Kanika Pasricha, economist with Standard Chartered Bank. However, she expects the Indian central bank to cut key policy rates by 50 bps in H1FY25. In an interview with Livemint, the economist also shared views on domestic inflation, currency moves and the impact of Bank of Japan’s yield control policy shift.
A. We do not see any rate changes by the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) till FY25. Given that the MPC hiked rates by 250 bps (almost half versus the US Federal Reserve), the extent of rate cuts is also likely to be way lower.
A. While interest rate differential has been a theme persisting for the last 3-4 quarters, the growth resilience of the Indian economy is also a key theme attracting flows. Out of the $20 billion FPI inflow in this financial year so far, close to $18 billion is in equity.
Also Read: As Fed hike, BoJ policy shift trigger risk-aversion, what would be RBI's next move? A. Our view is that the RBI will cut the repo rate by 50 bps to 6% in H1FY25. We see a 225 bps rate cut in the US by calendar year 2025.
A. No, we do not see a change in policy stance soon. A.
Given the spike in vegetables (especially tomatoes) and pulses prices, we see July CPI in a range of 6 - 6.3%. We do not rule out another print at close to 6% as vegetable prices may correct only by late August, with CPI likely to cool towards 5.5% by September. Our FY24 CPI forecast at 5.3% is above 5.1% for RBI-led MPC.
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