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Topic: Interest rate cut
Interest rate cuts could push emerging economies such as India into a quagmire of runaway inflation and currency weakness.
At the heart of India’s problems is a slump in consumption following a combination of policy missteps. Now, stagflation is looming.
RBI should pull down long-term yields by selling short-tenor bonds and reinvesting in longer-term ones, says IDFC AMC’s Suyash Choudhary.
Loan outreach programmes in rural areas have given the sense that consumption in rural & semi-urban areas is turning more positive, HDFC Bank says.
The repo rate cut, the 5th in a year the economy has seen a slowdown, is aimed at pushing up consumption during festival season by lowering borrowing costs.
While all 33 economists surveyed by Bloomberg News expect a reduction, their forecasts range from 20 basis points to 40 basis points.