RBI's monetary policy panel pares rates as Urjit Patel takes stage

India's newly appointed monetary policy committee (MPC) delivered a surprise 25-basis-point cut in the repo rate to 6.25% on Tuesday, as Reserve Bank of India (RBI) Governor Urjit Patel presided over his first policy review since his appointment last month.

The repo policy rate is now at its lowest since November 2010.

COMMENTARY:

Abheek Barua, chief  economist, HDFC Bank, New Delhi

"We had anticipated this, and given the current trajectory of inflation, there was a window of opportunity to cut rates. The sooner they did it the better. I am happy that they did it. In fact, unless the pay commission payouts and HRA allowances, lead to a pick up in inflation, I think there's room for another rate cut between now and the end of the year."

 

Rupe Rege-Nisture, group chief economist, L&T Finance Holdings

"While the RBI has cut the repo rate by 25 basis points, the policy statement remains less dovish in its guidance. It still sees upside risk to inflation target that has to be achieved by March end. While today's rate cut would accentuate the bond rally, I don't see much impact on the bank lending rates."

Radhika Rao, economist, DBS, Singapore

"Today's cut was along our expectations, with an unanimous vote by policy members. The accompanying rhetoric was relatively neutral rather than dovish, reinforcing the inflation target for Mar 17 at 5%, but with modest upside risks."

"This might inject some knee-jerk weakness in the markets. Today's cut we reckon was a front loaded move given pipeline cost-push pressures into next year and global uncertainties over the next six months. Liquidity stance will nonetheless stay supportive to help markets deal with upcoming FCNR maturities and ensure policy transmission remains on track."

P Phani Sekhar, fund manager, Karvy Capital, Mumbai

"We were expecting RBI to keep rates on hold as against a cut. But we believe a rate cut is not going to make a significant difference. Investors are watching for global action, whether RBI cuts or raises (interest rates) is of very little importance from a medium-term perspective."

"This is the first policy meeting of the new governor, we would not read too much into it."

"This policy, while important from a domestic point, serves limited purpose from a larger investor point of view. It is the global action that needs to be closely monitored."

Shubhada Rao, chief economist, Yes Bank, Mumbai

"This was along expected lines. That dominant pressure on headline inflation, mainly food, has begun to ease rapidly, which paved way for the 25 bps rate cut today."

"We believe that inflation is likely to surprise on the downside by about 20-30 basis points by end March, compared to the 5% stated by the RBI. As such, this could provide additional room for 25 bps rate cut in the current financial year."

"In our assessment, the monthly data on inflation print on account of food are likely to take the headline inflation at or below 4%, which could therefore allow the 20-30 basis points downside by end March."