§ RBI
lowered policy repo rate by 25bps from 7.50% to 7.25% and the same magnitude
for reverse repurchase rate to 6.25%. Cash reserve ratio was unchanged at
4.00%. The decision was in line with expectations, including ours.
§ Growth
projection is revised lower to 7.6% for 2015-2016. Inflation
is expected to be suppressed by high base effect until Aug before trending
higher into Jan 2016.
§ While
the decision is focused on boosting growth, RBI is
predominantly concerned about inflationary risks in the medium term and a
rate cut should be delivered now and not later as a later rate cut might
exacerbate inflationary pressures that could stem from poor agriculture
harvests and higher oil prices.
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