New Delhi: Receding inflation has raised hope for a further cut in the short-term lending (repo) rate cut by at least 50 basis points, which experts feel might come sooner than later.
“We see inflation at 5.5-6% by March. RBI can now more aggressively cut rates. I expect 100 basis points repo rate cut this year. There could also be a reverse repo rate cut of 50 basis points,” said Crisil’s principal economist D K Joshi.
For the week ended November 1, inflation slipped to single digit of 8.98% for the first time in the last five months.
RBI has already reduced repo rate by 150 basis points to 7.5% from the earlier level of 9% last month.
Following reduction in the repo rate and other benchmark rates, several banks have reduced the benchmark lending rate by 75 basis points, leading to cheaper home, commercial, auto and personal loan.
At the same time, RBI in the last one month has infused liquidity to the tune of Rs2,70,000 crore by cutting the Cash Reserve Ratio by 350 basis points and Statutory Liquidity Ratio by 100 basis points.
Measures to inject liquidity as well as nudge interest rate lower in the near term is likely as inflation concerns rapidly recede, said Yes Bank’s chief economist Subhada Rao.
“I expect repo rate cut of 50 bps in the near term. There could also be a possibility of 25 bps cut in the reverse repo as well,” she said.
Even corporate India has stepped up its demand for cut in lending rates as the inflation dipped to single digit at 8.98% for the week ended 1November.