Jun 15, 2012, 08.12 AM | Source: Reuters
The RBI has "no room" to cut interest rate on Monday after WPI inflation was revised upwards in March, making it "a foregone conclusion" that the April and May data will also be revised upwards, CLSA says.
CLSA does not rule out "a small" cut in the cash reserve ratio after WPI core inflation for May was "stable" at 4.8 percent, as per its calculations.
CLSA says WPI data does not take into account the electricity tariff increases in some states and says food composite inflation "remained elevated." Vegetable prices "remain a problem area" due to weather-related factors and supply bottlenecks.
"It is now firmly established that RBI prematurely eased by a bigger-than-expected 50 bps in April despite overshooting its own inflation forecast for March," CLSA writes.
The RBI cut the repo rate by 50 basis points in April, bringing the repo rate to the current 8.00%.