RBI to keep all its rates on hold – TDS

In line with the consensus, analysts at TDS expect the RBI to keep all its rates on hold, with, in particular, the Repurchase Rate remaining at 6.0%.

Key Quotes

“Recent growth data provides more monetary headway for easing, but the RBI will want to get more evidence that CPI is under control before cutting again. The RBI’s medium-term target is 4±2% as compared to CPI inflation at 3.6% Y/Y in October—this is above this year’s lows at 1.4%, but remains well within the target range.”

“The big test for India’s CPI will be withstanding inflationary pressures from higher global commodity prices, and demand-side pressure from improving consumption if, as we believe, the effects of the GST and demonetisation fade completely over the course of 2018. In 2018, however, we think the RBI could cut once in Q2, possibly even twice if inflation proves particularly benign. This should result in lower front-end yields as the market is currently positioned for stable or slightly higher rates.”