Halister News

(Bloomberg) -- Expectations are mounting that new RBI Governor Patel will lower rates at his first meeting on Oct. 4, bolstered by data showing drop in CPI inflation, economists say. Any easing, though, would likely be limited as central bank keeps its 4% medium-term inflation target in mind.

• Data Monday showed Aug. CPI +5.05% vs +5.20% est., +6.07% in July
• July factory output -2.4% y/y vs +1.4% est., +2.0% prior

• RBS (Vaninder Singh)
  • RBI Oct. rate call on knife-edge
  • Still expect another 50 bps of cuts over next two quarters
  • Difficult to pin down timing of first without more clarity on composition of monetary policy committee
  • If in place by next meeting, will probably have 50-50 hawk-dove split
  • Unanimous decision likely as MPC won’t want to show discord at first meeting

• DBS (Radhika Rao)
  • CPI likely to slip below 5% Sept.-Dec and then inch up in Jan.-March quarter
  • Softening trend leaves door open for rate cut in 4Q
  • Odds are rising for move in Oct.
  • Benign inflation path and probably dovish policy committee should allow further easing, though could be offset by firmer demand dynamics and risks of U.S. rate normalization as Sept. FOMC approaches

• Nomura (Sonal Varma & Neha Saraf)
  • Moderation in food prices coupled with favorable base effect should keep headline CPI below 5% until yr-end
  • Likely to revert to underlying 5-5.5% trend by March
  • 25-bp repo rate cut likely in 4Q, probably Dec.; then extended pause in 2017

• Kotak Mahindra (economists including Madhavi Arora)
  • Still see 25-bp cut in Dec. with inflation likely to moderate further
  • RBI will want to be optimistic about 5% CPI goal, tide over FX volatility risks during FCNR redemption, and weigh various global risks before delivering another rate cut