India: RBI on hold, but remains accommodative – Nomura

By FXStreet FXStreet (Delhi) – Research Team at Nomura, notes that the Reserve Bank of India (RBI) kept the repo rate unchanged at 6.75%, in line with expectations but Nomura expects a 25bp rate cut in April.

Key Quotes

• “The RBI projects CPI inflation to be below 6% in January 2016 and around 5% by Q1 2017, though this does not factor in the impact of the seventh pay commission.

• It projects FY16 GVA growth at 7.4% with a downward bias, with growth picking up to 7.6% in FY17 (revised down from 7.8% in September).

• In its guidance, the RBI reiterated that even though rates were unchanged today, it remains accommodative and is awaiting clarity on (1) the evolving inflation trajectory and (2) structural reforms in the budget. At the same time, it emphasised the importance of macroeconomic stability for sustainable growth, indicating that aggressive easing to lift growth temporarily is unlikely.

• In the post policy call, the RBI stated that it is (1) reviewing the current liquidity framework; (2) it may allow banks to include non-recognisable assets (such as real estate) towards capital requirement under Basel; and (3) the government is committed to recapitalise public sector banks adequately.

• We …read more

Source:: FX Street