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India: Monetary Policy Outlook April 2016 - NAB

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Apr 12, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    Research Team at NAB, notes that the RBI cut the policy Repo rate by 25bps at its April meeting and also tightened the policy corridor to better align policy rates with the call rate (interbank overnight borrowing rate).

    Key Quotes

    • “Subdued inflation outcomes (due to lower food prices), the Government’s commitment to fiscal consolidation and weak capital spending led to the rate cut.

    • The most significant changes, however, were the additional liquidity measures announced to facilitate more effective monetary transmission.

    • Foreign portfolio investors have turned to net purchasers of Indian equity markets since March, following 3 months of outflows.

    • Volatility in the foreign exchange market remains muted, assisted by record high FX reserves.

    • NAB Economics is forecasting another rate cut in the September quarter to 6.5%.

    • Uncertainties regarding the Seventh Pay Commission’s recommendations, the upcoming monsoon season and a possible re-emergence of commodity price pressures could limit the scope for further cuts.”
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