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28 Nov 2014
RBI to cut rates or not? – RBS
FXStreet (Barcelona) - The Research Team at RBS, view that RBI would hold policy rates unchanged next Tuesday even as it faces an increasing political pressure for a rate cut.
Key Quotes
“The central bank is under increasing political pressure as Finance Minister Jaitley would press RBI Governor Rajan to lower borrowing costs at the MPC meeting scheduled on 2 December according to Reuters.”
“We expect the nation’s CPI inflation to ease further in the coming months on falling commodity prices while the RBI is likely to cut policy rates early next year to bolster the nation’s economic growth. We think easing monetary policy could weaken the INR in a knee-jerk response but markedly steepen the inverted INR ND OIS curve that has bull-flattened a lot since April this year.”
“We remain bullish on the INR in the year of 2015 on the back of improving inflation-growth outlook.”
“We would stay with our short EUR/INR cross position to chase the INR’s high yield. The ECB’s QE programme and sustained market hopes of reform efforts of Indian government could send the cross pair lower.”
“On the technical side, USD/INR spot is likely to trade in a range even though it could break above the critical resistance level of 62 held since early March as the central bank is expected to stay on both sides to curb FX vols.”
Key Quotes
“The central bank is under increasing political pressure as Finance Minister Jaitley would press RBI Governor Rajan to lower borrowing costs at the MPC meeting scheduled on 2 December according to Reuters.”
“We expect the nation’s CPI inflation to ease further in the coming months on falling commodity prices while the RBI is likely to cut policy rates early next year to bolster the nation’s economic growth. We think easing monetary policy could weaken the INR in a knee-jerk response but markedly steepen the inverted INR ND OIS curve that has bull-flattened a lot since April this year.”
“We remain bullish on the INR in the year of 2015 on the back of improving inflation-growth outlook.”
“We would stay with our short EUR/INR cross position to chase the INR’s high yield. The ECB’s QE programme and sustained market hopes of reform efforts of Indian government could send the cross pair lower.”
“On the technical side, USD/INR spot is likely to trade in a range even though it could break above the critical resistance level of 62 held since early March as the central bank is expected to stay on both sides to curb FX vols.”