Inflation fall may trigger cut in repo rate: Yes Bank

Inflation, Rao feels, could come to single-digit numbers sooner than earlier expected. “We had estimated that inflation could touch single digit in March but given the current trend, January itself we could see a single digit number on our screens.”

Q: Would this mean that a rate cut is a given?

A: The probability of the rate cut now even increases further. The first phase clearly was the emphasis on liquidity, which from today onwards looks to be able to be appearing stable to me here on. Clearly the focus now will also shift towards growth as well, especially in the context of benign cues.

The Indian crude basket as we speak has come below USD 68 per barrel and that’s a huge positive. The seasonal factors are behind us in terms of negative cues. Domestically speaking, for primary articles, the manufactured product prices are showing some level of stability now. So across the board, we are seeing significant stability, which is now giving us a fairly positive environment. That should be a strong positive for the (RBI) governor to emphasise on financial stability first and then promoting it.

Q: So you are saying a 0.50% cut?

A: I would think a 50-basis point cut is on cards.

Q: What’s your estimate of the inflation trajectory from here on? When are you projecting single digits?