RBI refrains from lowering rates amid quiet disinflationary trend

And lack of material changes in the fiscal outlook.

India’s central bank opted not to make any significant moves.

DBS reports that after Jan’s inter-meeting cut, the Reserve Bank of India (RBI) refrained from lowering rates on Tuesday. The Repo and Reverse repo rates were left unchanged at 7.75% and 6.75% respectively.

According to the RBI, absence of material changes in the disinflationary trend and fiscal outlook since mid-Jan suggests current policy settings were appropriate. The FY15/16 budget due later this month and release of rebased GDP and CPI numbers over the next two weeks will also be watched closely.

DBS sees room for another 50bp cuts by June, after the Budget contents are sieved through, An off-cycle move in March, soon after the Budget, cannot be ruled out. Room for easing rates in 2H15 is constrained by a narrowing output gap, shift in the 2016/17 CPI targets in consultation with the government and external risks.