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RBI Likely to Cut Interest Rate in June

RBI had cut interest rate by 25 basis points each in February and April to boost economic growth

The Reserve Bank of India (RBI) is likely to cut interest rates one more time in June before rising inflation pressures and elevated fiscal deficits leave little room for further accommodation in rest of the year..

RBI had cut interest rate by 25 basis points each in February and April to boost economic growth.

In a report on the forecast for global monetary policy actions and resulting economic impact, the London-based global information provider said RBI is likely to tighten its monetary policy stance in early-to-mid 2020.

“With both domestic and global growth slowing and inflation in India remaining below the RBI’s inflation target, it is now increasingly likely the RBI will proceed with another rate cut in June.

“Beyond June, intensifying inflation pressures and elevated fiscal deficits will leave little room for further accommodation, and we expect no additional rate cuts in 2019 with the monetary policy likely to switch to tightening in early-to-mid-2020,” it said.

The report noted that food and fuel prices should accelerate in coming months particularly in the event of a sub-normal monsoon, and headline inflation would cross 5 per cent mark by the second half of 2019, and average 4.2 per cent in 2019 and 5.3 per cent in 2020.

The Fed initiated its now-famous ‘pivot’ by indicating there would be fewer rate hikes in the near future and the reductions in its balance sheet would be more measured.

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