Summary and Overview:

• The RBI cut the benchmark Repo rate by an outsized 50bp on the 29th of September to 6.75%.

• In addition to muted inflationary pressures and limited evidence of a pickup in growth, global factors (particularly around Emerging markets) influenced this decision.

• The RBI will work with the Government to exert pressure on banks to pass on most of the 125bps of rate cuts this year.

• Looking forward, NAB Economics is forecasting the RBI to remain on hold for the rest of 2015, with the Repo rate to remain at 6.75%.

• Further ahead, NAB Economics is forecasting 2 more cuts to the Repo rate in 2016, with the Repo rate expected to end 2016 at 6.25%.

• The risks to the forecasts are evenly balanced.

• In addition, the RBI announced a number of important regulatory measures, including greater overseas participation in Government bonds, and steps to boost the depth of the foreign currency market.

For further analysis download the full report.

India Monetary Policy – September 2015 ( PDF 219 KB)