The Reserve Bank of India (RBI) kept its key policy interest rates unchanged earlier this week, but continues to display a clear dovish bias, as indicated by its comment, that “going forward, the accommodative stance of monetary policy will be maintained, but monetary policy actions will be conditioned by incoming data.” The RBI also appears confident in achieving its retail (CPI) inflation target of 6% by early 2016. The bank highlighted that potential upside risks to inflation (ie, weather aberrations, administered price hikes, geo-political factors) are counter-balanced by global deflationary/disinflationary trends, the still soft outlook for global commodity prices and the slack in the domestic economy. “We continue to forecast a 25bp cut in the repo rate in June. We would also not rule out the risk of further easing, but this will depend on greater clarity on 2016 inflation and the impact of a potential Fed rate hike in H2 2015.” – Barclays Capital said in a report on Friday
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