Expect RBI to keep repo rate and CRR unchanged - ICICI Bank : Treasury Research

We expect the RBI to keep the repo rate and cash reserve ratio (CRR) unchanged at 7.25% and 4% respectively in the mid-quarter review on 17th June.

While the recovery trajectory remains weak and inflation is benign, we believe that the RBI would take a brief pause in the easing cycle and assess the situation till the July meeting, given the sharp depreciation in the Rupee (down 7.5% since the previous meeting) amidst outflows from debt markets and elevated trade deficit.

We also expect the RBI to keep the CRR unchanged given that systemic liquidity is well within the comfort zone and with CRR already at 4-decade low levels.

We continue to maintain our call of 50 bps additional repo rate cut in balance FY2014 with a high probability of 25 bps cut in the July meeting. We expect the RBI to closely watch the market moves, June trade deficit and progress in monsoons given the elevated food inflation ahead of the July 30th review.

Source : Equity Bulls

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