RBI likely to cut interest rate again in June

New Delhi: The Reserve Bank of India (RBI) is likely to cut interest rates one more time in June before rising inflation pressures and elevated fiscal deficits leave little room for further accommodation in rest of the year, IHS Markit said Wednesday.

RBI had cut interest rate by 25 basis points each in February and April to boost economic growth.

In a report on the forecast for global monetary policy actions and resulting economic impact, the London-based global information provider said RBI is likely to tighten its monetary policy stance in early-to-mid 2020.

“With both domestic and global growth slowing and inflation in India remaining below the RBI’s inflation target, it is now increasingly likely the RBI will proceed with another rate cut in June.

“Beyond June, intensifying inflation pressures and elevated fiscal deficits will leave little room for further accommodation, and we expect no additional rate cuts in 2019 with the monetary policy likely to switch to tightening in early-to-mid-2020,” it said.

Monetary policy easing, coupled with the relaxation of lending rules and greater election-driven fiscal spending in the first quarter of 2019, will provide some support to growth during the first half of 2019-20 fiscal, it said.