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HSBC expects RBI Governor to maintain status quo in forthcoming policy review

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Even though the fall in oil prices has created some space to ease rates, HSBC today said it expects RBI Governor Raghuram Rajan to maintain status quo in the forthcoming policy review and wait for the fiscal roadmap presented in the Budget.

“We do not think RBI will cut rates on February 2,” it said in a note.

The foreign brokerage said even though oil has “opened some space”, the exact quantum of the benefit will only be determined once the markets stabilise, and also by the stance of the Central government, which has till now let pass only half of the benefit by raising duties on oil products.

“The Budget on February 29 should show how this extra space will be shared between monetary and fiscal policies,” the report noted.

The RBI will also be closely watching the Budget fine print, it said, adding its effect on inflation and financial stability will be closely watched.

Additionally, there are other factors governing inflation which will play out in the next few weeks, like the arrival of the Rabi crop, it said.

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