The RBI is expected to cut the key interest rates by another 50 basis points (bps) in the the current financial year, says a report by Morgan Stanley. Earlier, the RBI had reduced its policy rates in April by 25 bps to 6.5%. However, the central bank is expected to keep key rates unchanged in the next policy meeting, to be held on June 7.

In terms of pace of rate cuts, the global brokerage firm expects the Reserve Bank to wait for the onset of monsoon to see the trend in actual inflation, and hence expects the RBI to keep rates unchanged in the next policy meeting on June 7.

“We see a higher chance of RBI reducing rates in the October meeting. However, there is a possibility of RBI cutting rates in the August meeting if the rainfall arrives in time and is significantly above normal by end of July,” the report said adding “post that, we expect RBI to move in December or February meeting, with the key event to watch being Fed monetary policy action”, the global brokerage firm report said.

Earlier in April, RBI reduced its policy rate by 0.25 per cent to 6.5 per cent. While this was the first rate cut after a gap of six months, RBI has lowered its rate by 1.5 per cent cumulatively since January 2015.

However, the industry still wants further rate cuts from RBI to boost investment.


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