Free Trial

INDIA: JP Morgan Adjust Call for First RBI Rate Cut from Q3 to Q4

INDIA
  • JP Morgan note that the delay of the monsoon has meant an extended heat wave in parts of the country and this has pushed up food prices. As a consequence, headline CPI is expected to re-accelerate to about 5% in June, higher than previously envisaged.
  • Similarly, telecom companies have raised tariffs by about ~15% in July. Given the weight in the CPI basket and past translation trends, this should push up headline CPI by another 20bps or so, starting July.
  • Assuming a strong monsoon for the rest of the season, JP Morgan still expect inflation in the 4% handle in the second half of the fiscal year. But the recent uncertainty pushes out the timing of the first rate cut. JP Morgan therefore adjust their call for the first cut from 3Q (August) to 4Q.
  • For now, JPM pencil in easing at the December meeting by which time the dust would have presumably been washed away by the monsoon. That said, they add that they still cannot rule out October if economic momentum slows more than expected.

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.