RBI seen holding repo at 5.25% as Iran peace deal eases pressure, BofA says
A BofA Securities note expects the Reserve Bank of India to keep its repo rate at 5.25% as the Iran peace deal eases geopolitical pressure. According to Economic Times, the RBI will continue to closely monitor pass-through from food and fuel prices to headline inflation.
BofA Securities analysts expect the Reserve Bank of India to hold its repo rate at 5.25% at the next Monetary Policy Committee meeting. According to Economic Times, the note highlights how the recent US-Iran peace deal has eased oil prices and a more moderate trajectory in food inflation gives the central bank room to wait.
BofA forecasts headline CPI at around 3.8% in July, with core inflation staying near 4.5%. The analysts say the RBI will focus in particular on the monsoon and food prices, on the pass-through from fuel taxation, and on household inflation expectations.
The rate outlook is supporting stability in the rupee, with bond yields trading close to year-to-date lows. Investors are looking for clues on a possible rate cut at the following meeting, but BofA does not expect a full easing cycle to begin before October.
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