RBI likely to announce 25 basis points rate cut today

As the wholesale and retail inflations for June - 2.02% and 3.18% respectively - are well within the mandated limit of 4%, it will prompt the RBI to cut the repo rate further.

Mumbai: Amid slowing economy, the Reserve Bank of India (RBI) is likely to change key policy rates today. As per the experts, the Monetary Policy Committee (MPC) of the Central Bank might cut key repo rate by 25 basis points for the fourth consecutive time taking the benchmark repo rate to 5.50 per cent.

The 3-day long bi-monthly MPC meet for August-September began on August 5. The meeting is headed by RBI Governor Shaktikanta Das.

Reasons that might lead to a rate cut:

• Indicating further rate cuts, the MPC has changed the stance of the monetary policy from neutral to accommodative in its previous bi-monthly review meeting
• As the wholesale and retail inflations for June - 2.02% and 3.18% respectively - are well within the mandated limit of 4%, it will prompt the RBI to cut the repo rate further
• Though sluggish in June, the monsoon has started picking up since the third week of July. As a result, the agriculture output and subsequently, the food prices would be in the desired limit in the coming months
• The automobile sector is going through the worst phase in decades. Experts believe auto loans have to be cheaper in order to boost the stagnated demand in this sector
• Finally, the liquidity crunch is the major worrisome factor for Indian Inc. The repo rate cut is required to improve the most sought after credit at cheaper rates