Market experts appreciate and acknowledge the tough job of RBI in managing inflation and growth. But they are skeptical about its ability to control inflation as CRR has been cut by 175 basis points in calendar year 2012 but inflation continues to remain firm and sticky. In that sense, they are disappointed. Says Dinesh Thakkar, chairman and managing director, Angel Broking, “High food prices, the pass through effect of fuel price hikes and sticky core inflation are likely to keep inflation elevated until December.”
Consequently, policy rate cuts are unlikely to happen in the next policy (December). Says Dinesh, “I maintain our expectation of a 25 - 50 bps rate cut towards FY13-end.” Adds, Rahul Goswami, CIO-Fixed Income, ICICI Prudential mutual fund, “As the government’s reform actions translate to moderation of the twin deficits, RBI will get significant headroom to initiate aggressive monetary easing which can come as early as the first quarter of calendar year 2013 (Q1CY13).” Siddhartha Sanyal and Rahul Bajoria from Barclays Emerging Markets Research, forecasts a 100bp reduction in the repo rate during Q1CY13.
