How RBI will communicate on Rate Cut?

BE/RBINOTE/48/2019

RBI

Interest rate cuts are expected in the Monetary Committee meeting of RBI on Friday the 4th October 2019.  Experts say that an assured recovery of the bond market can be ascertained only with further rate cuts from RBI. Further,

  1. Experts feel RBI should keep the market anticipating for more to come for investors to remain interested in buying bonds.
  2. All 33 economists surveyed by Bloomberg expect a rate cut on Friday the 4th Oct 2019 by say from 20 to 40 basis points.
  3. The ten year bonds sold off despite the Reserve Bank of India cutting rates by an unconventional 35 basis points in August this year.
  4. The RBI Governor opines that a 50 basis-point reduction would amount to doubting on the future rate cuts. What is essential is that how well they communicate on the lowering of the Repo rate.
  5. The yield on a 10 year debt fell five basis points to 6.61 per cent on 3rd instant on a consecutive fall inspite of high speculation that RBI would cut the rate further.
  6. Speculations are that the authorities might lower the key rate by 40 basis points to 5 per cent and a reduction of that size would make it hard for RBI to signal space for further easing.

The market which is easing from a two month sell-off sparked by fears of bloated bond supply will take a 40 basis point cut thus ending the easing cycle. RBI is of-course is tightly placed and best communication is necessary at this juncture.

Avatar

Author: Admin Bankedge

No Comments

Post a Reply