India: RBI to leave its policy repo rate unchanged - Nomura

Analysts at Nomura expect the Reserve Bank of India (RBI) to leave its policy repo rate unchanged at 6%, in line with consensus expectations.

Key Quotes

“Given the rise in oil prices, we expect the RBI to raise its CPI inflation projection from 4.3-4.7% in H2 FY18 to 4.4-4.8% in Q1 2018, while maintaining its projection of ~4.5% in Q1 2019. We also expect it to revise its FY18 GVA growth projection down to ~6.5% y-o-y from 6.7% –still above the advance estimate of 6.1% – while maintaining its view of a recovery to 7.4% in FY19.”

“Given the likely lowering of growth and raising of inflation forecasts, the RBI will likely retain its neutral policy stance. However, we expect it to flag upside inflation risks emanating from higher oil prices, a slower pace of fiscal consolidation and potentially higher minimum support prices. In our base case, we expect rates to left unchanged in 2018 amid slightly more hawkish rhetoric in Q2, as both growth and inflation will likely rise.”