RBI probably go for Monetary easing in its June 17 Meeting

The Reserve Bank of India may probably go for further monetary easing at its policy meeting on 17th June.

According to various global investment institutions, due to the inflation coming down and growth indicators being slugish, the central bank may cut the key policy rates to ease the money into the market.

The market hopes for monetary easing to resurrect drooping economic growth, as the headline WPI inflation fell to 41-month low in April (4.89 per cent), and is in the central bank's comfort zone of less than 5 per cent.

The Reserve Bank of India Governor D Subbarao also said last week that, "We will consider the softening of inflation and the external payments situation in the next mid-quarter policy statement on June 17.

Barclays, a major global financial services provider, said that, "We believe the WPI inflation report provides ample room for the RBI to cut policy rates at its June 17 policy meeting, and expect the repo rate to be cut to 7 per cent (another 25 bp cut) by mid-2013. Moreover, we think the likelihood of further rate cuts (another 50bp to 6.50 per cent) in the second half of 2013 has risen significantly".

According to HSBC Chief Economist for India & ASEAN, Leif Lybecker Eskesen, "the inflation picture is clearly improving, which has increased the chance that the RBI will ease again."

Meanwhile, Morgan Stanley in a research note said, "we expect RBI to cut policy rates by a further 25-50 bps (0.25-0.50 per cent) by end FY2014 and market oriented interest rates to decline by 100bps (1 per cent)."

Bank of America Merrill Lynch said, "We have added a second 25bps (0.25 per cent) RBI rate cut on July 30 after the one on June 17 to revive growth after April WPI inflation dropped to 4.9 per cent."