RBI likely to slash rates again by June

Bloomberg

India’s central bank is on course for its most aggressive monetary policy easing in more than three years, as it seeks to support the world’s fastest-growing major economy in the face of risks both at home and abroad.
The Reserve Bank of India (RBI) delivered its second successive interest rate cut and said it stands ready to use all tools available to it to ensure liquidity in the banking system, after lenders failed to fully pass on the previous cut to borrowers.
Economists predict the RBI will cut at least once more, possibly as early as June, as businesses rein in investments amid political uncertainty fueled by elections starting next week. With consumption taking a hit due to a crisis in the shadow banking sector and exports stagnating because of a global slowdown, India’s growth prospects have considerably dimmed.
Traders were disappointed the RBI didn’t shift its policy stance from neutral to signify more aggressive action, prompting the rupee and bonds to drop.
The central bank, which targets inflation at 4 percent in the medium term, lowered forecast for consumer price growth and said underlying pressures could ease given recent slowdown. The RBI downgraded gross domestic product growth forecast for the financial year that began April 1 to 7.2 percent from 7.4 percent seen in February.
“With the inflation outlook remaining benign, the RBI will address the challenges to sustained growth of the Indian economy, while ensuring price stability on an enduring basis,” Governor Shaktikanta Das told reporters in Mumbai. He added that there was a need “to strengthen domestic growth impulses by spurring private investment, which has remained sluggish.”
Companies have shied away from borrowing in a market that was home to one of the highest real rates of interest. The total value of new projects fell to 1.99 trillion rupees ($29 billion) in the quarter to March.