RBI's Mid Quarter Monetary Policy June 18 Preview - Microsec Research

The Reserve Bank of India (RBI) is scheduled to announce its Mid Quarter Monetary Policy on June 18. This time the expectation of economists, bankers and analysts on June 18 monetary policy are poles apart. As per the Bloomberg poll, 17 out of 23 economists predicts a 25 basis points repo rate cut, 2 predicts 50 basis points cut and 4 economists predicts that RBI will leave repo rates unchanged at 8 percent.

On the CRR front, only 3 out of 20 economists expects a 50 basis points CRR cut and rest expects CRR to remain unchanged. Surprisingly, Banking stalwarts like SBI chairman has voiced his opinion that CRR should be cut by almost 100 basis points. Also, MD of HDFC Bank Mr. Aditya Puri went on record that CRR should be cut. Other leading Banking personnel has similar views.

There seems to be a complete divergent view between economists and Bankers. Looking at the deteriorating GDP growth rate, it seemed pertinent that repo rate and CRR would be cut, but WPI numbers and particularly the revision of March 2012 WPI numbers on a higher side by 80 basis points at 7.69, it looks imminent that repo rate may not be tinkered with. However, we expect RBI may tackle the situation through reducing CRR by at least 50 basis points.

Source : Equity Bulls

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