Reuters Market Eye - Bank of America Merrill Lynch now expects a 25 basis point cash reserve ratio cut instead of a repo cut on Monday as it feels the RBI will not want to court controversy by cutting rates when the INR is just stabilizing.
The investment bank, however, expects a repo cut at the July 30 review and then a pause to see how the softer agflation offsets the hike in administered prices of coal, diesel and electricity, it said in a note on Thursday.
BofA-Merrill believes that RBI will now try to hold the rupee in a 54-58/dollar band, assuming the US dollar stabilizes at 1.30-1.20/euro band.
(Reporting by Subhadip Sircar)