CLSA’s Malik Expects RBI to Cut Interest Rates in April-June

Rajeev Malik, an economist at CLSA Asia Pacific Markets in Singapore, comments after the Reserve Bank of India raised interest rates today, the 13th increase since the start of 2010, and signaled a possible end to its record cycle as the economy cools.

The central bank boosted the repurchase rate to 8.5 percent from 8.25 percent, a decision predicted by 18 of 28 economists in a Bloomberg News survey.

“I think it will be wait-and-watch approach because the governor has already indicated a low probability of a hike in December. RBI will maintain status quo for the next several months at least until the annual policy for FY 2013. I expect the first rate cut sometime between April and June next year.

“The style of unique guidance about low probability of a hike in December was not necessary. Instead, it could have said future action will be conditioned on the evolving inflation growth trajectory, so as to benefit from its hawkish stance and the latest rate hike. Hopefully, RBI will not fall flat as it did after a similar guidance late last year.”

To contact the reporter on this story: Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net.

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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