Bank of America-Merrill Lynch (BofA-ML) expects RBI governor Raghuram Rajan to pause on rates on Tuesday to await further clarity on the monsoon and allow expected September 17 Fed hike to play out.
''At the same time, he will likely strike a dovish note to reiterate that the door is open for further rate cuts to support growth. Looking ahead, we expect the RBI to cut another 50bp with inflation well set on its 'under-6%' January 2016 target,'' it said.
''With rains at 96% of normal and markets taking a possible September Fed hike in their stride today, we are advancing our next 25bp RBI repo rate cut to September 29 from February 2. We continue to expect a final rate cut on February 2,'' BofA-ML said.
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