Experts see a case for RBI rate cut in February

The Consumer Price Index (CPI) for the month of November came in at record low of 3.63 percent.
Soumya Kanti Ghosh, Chief Economic Advisor at State Bank of India says the CPI would likely come in below 3.5 percent for December and would be a similar number for January. However, it could move up to 4 percent by February or March. So the average for FY17 would be around 4.5 percent.

The RBI and the government have set a retail inflation target of 4 percent for the next five years with an upper tolerance level of 6 percent and lower limit of 2 percent.

Ashutosh Khajuria, ED at Federal Bank and Anubhuti Sahay, Head of South Asia Economic Research (India) at Standard Chartered Bank believe there is now scope for a rate cut by the RBI in its February policy, more so because by then the US Fed meet decision will be out, there will be more clarity on where food prices are headed and the Union Budget too will be behind us. All these will give the Monetary Policy Committee enough material to decide on a rate cut, says Sahay who expects a 25 basis-points cut in the February policy.

However, Khajuria, does not expect much movement in the bond market because of the November CPI number.