Prasanna Ananthasubramanian, chief economist at Mumbai-based ICICI Securities Primary Dealership Ltd., comments on the Reserve Bank of India’s decision to cut interest rates for the first time since 2009.
The central bank slashed the repurchase rate by a greater- than-forecast half a percentage point to 8 percent, from 8.5 percent, at the annual policy review today.
“It is a surprise. It seems they have taken a lot of comfort from the fall in core inflation so they have decided that growth concerns are more important at this point of time. Since they have taken such a big step, I expect RBI not to move on rates for the next six months.
‘‘Further rate action can only be expected in the second half of the financial year and a key precondition for that will be that the government puts in place some measures to cap subsidies. And that we should expect in the next two months, once the budget session of parliament ends, and based on how that pans out, RBI may decide on rate cuts in the second half.’’
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