Will RBI slash interest rates on Monday.....?

With the increase in diesel prices ,and the Wholesale price Index (WPI) for the month of August rose much above expectation to 7.55%
versus 6.87% in the month of July  will the Reserve Bank of India continue to remain hawkish , or can one expect a rate cut in the upcoming Monetary Policy review?

Well the Present scenario doesn't supports either CRR cut or Repo rate cut in the upcoming Monetary policy review.



The probable reasons for RBI not going for rate cut are as follows .

• With the increase in diesel prices by rupee five , it is going to effect the inflation in when next inflation data comes it will be evident in that as one of the common modes of the transportation in India is trucks & lorry which are run on diesel , and it is almost certain that the rise in price will have to born by end customer only thus resulting in increase of necessary articles.
• High commodity prices are also seen having a negative impact on the inflation
• A Week rupee sentiment will also add fuel to inflation.
• liquidity conditions have turned substantially benign with average liquidity deficit in the system having declined to rs 40,000 cr since July compared to Rs 97,000 cr between April-June. In fact , even for the next two months, we expect liquidity deficit to average Rs 60,000-80,000 Cr well Around RBI's comfort zone. Mean While the Slowing economy is taking a toll on credit off-takes across sectors.
• Weakness in economic activity persists , banks remain burdened and government not taking any concrete steps in Economic reforms.

We expect the RBI to hold both the repo and CRR unchanged in the ensuing meeting and reassess its decision in the October policy once some concrete steps are undertaken by the Government to erase the fiscal excesses and as the inflation trajectory becomes clearer.