TIL Desk/Business/New Delhi/ The Reserve Bank is expected to go for a 25 basis points (bps) repo rate cut in its policy review meet on August 2 as inflation is likely to have reached a new normal of 4 per cent, says an HSBC report.
According to the global financial services major, inflation in India has fallen dramatically, and though the excessively low level it witnessed this fiscal is not sustainable, the rebound may not be too sharp either.
A cut in key policy rates is likely as the country’s inflation differential with the world is normalising, inflation expectation is moderating and food prices are also receding, the report said.
“All considered, we continue to expect a 25 bps rate cut in the August 2 meeting. We expect the central bank to maintain its neutral stance, which we believe is consistent with moderate rate cuts,” HSBC said in a research note.
The report noted that, inflation may already be at a new normal of 4 per cent. “We’ve said this before, and we have found new evidence since: India may have already become a 4 per cent inflation economy,” HSBC added.
