Guest post: seven reasons why India will cut rates on April 7 | beyondbrics

Guest post: seven reasons why India will cut rates on April 7 | beyondbrics:



"The general drift in the financial trenches is that Governor Raghuram Rajan of the Reserve Bank of India (RBI) will stay on hold at the bank’s April 7 policy meeting. After all, he just cut rates – in a second consecutive out-of-meeting action – in early March. What’s more, consumer price inflation moved up in February; this will constrain the RBI from easing. Finally, following the surprise rate cut in January, the RBI had stayed on hold at its February policy meeting; it will repeat this behaviour next month.



For these reasons, hardly anyone expects a rate cut next week. However, valid as these arguments are, they are overshadowed by factors that make a stronger case for another cut.



The debate is not really about whether Rajan will cut rates at least once more. The key point is the timing of his next move. The governor has three options: cut rates again on April 7; announce another out-of-policy move; or wait for the RBI’s June policy meeting."



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