RBI To Hold Rate Cut Until Govt Implements Reforms-CS

The Reserve Bank of India may want to wait and see if the federal government's policy changes late last week are actually implemented before it cuts interest rates, says Credit Suisse economist Robert Prior-Wandesforde in a note. Moreover, with inflation in August accelerating to 7.55% on-year, it is difficult for the central bank to respond with a rate cut. "In our view, the measures will successfully delay any action from rating agencies, while proving a necessary but not sufficient condition for the RBI to cut again," he says. The RBI's policy tone today may be dovish today, but Credit Suisse expects a rate cut--of 50-bp--o only at the Oct. 30 rate-setting meeting. The house says it's a shame the government waited so long to take action.

In fact, "there is still a huge amount more that could and should be doing to transform the structural fortunes of the Indian economy, including expansion of the tax revenue base and liberalising the labour market." The RBI decision is due 0530GMT.

RBI To Hold Rate Cut Until Govt Implements Reforms-CS

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