Morgan Stanley Research expects RBI is likely to keep policy rates on hold on December 2 meeting. 'We believe that key to watch will be the RBI's language regarding its comfort about achieving its inflation target according to its pre-guided glide path - and in turn, the implications for timing of the first rate cut.'
'Indeed, we expect the RBI to indicate that inflation will likely transition to the 6% glide path target well ahead ofthe previously indicated timeline of January 2016,' Morgan Stanley said.
'We expect the RBI to lower rates by 50bps in 2015. From the perspective of underlying cost of capital, we expect one-year deposit rates (which are currently higher than the policy rate) to decrease by 125bps,' it opined.
'If our bull case scenario for inflation pans out, we expect policy rates to be cut by 100bps and one- year deposit rates to fall 150-200bps,' it added.
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