New Delhi, Dec 7: Today, the Reserve Bank of India (RBI) will make its first monetary policy review announcement since high value notes were scrapped on November 8. The announcement is expected at 2:30 pm. Here are 10 things to bear in mind ahead of the announcement.
2. Some analysts expect an even deeper 50 bps cut to combat the several cash crunch following the November 8 decision to scrap Rs 500 and Rs 1,000 notes.
3. The last rate cut was in October, when the RBI cut the repo rate by 25 to 6.25 per cent.
4. While the rate cut will raise concerns about inflation, analysts see the cut also as a "growth supportive stance to offset downside risks to growth from the demonetisation effort," as Radhika Rao, an economist with DBS Bank, wrote in a note, according to Reuters.
5. A cut in the repo rate should ideally bring down banks' borrowing costs, eventually leading to lower loan rates for companies and individuals.
6. Therefore, a rate cut is expected to help revive private investments in an atmosphere where short-term growth is likely to be impacted.
7. The country's economy grew 7.3 percent between July and September, the fastest rate in the world for an economy of its size. November inflation was at 4%, which HDFC Bank termed "comfortable territory".
8. Brokerage firm Bank of America Merrill Lynch meanwhile cut its GDP growth forecast to 6.9 per cent from the earlier 7.7 per cent, saying that disruption to economic activity caused by demonetisation will be 0.3-0.5 per cent of GDP every month.
9. Merrill Lynch also said the RBI will now likely wait until April 2017 for the next rate cut.
10. Ahead of today's rate cut announcement,banks had already begun to reduce interest rates.
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