RBI is likely to deliver 25bp cut in September

Indian economy likely to experience a strong deflationary pressure during FY 15-16. Such rapid disinflation allowed the Reserve Bank of India (RBI) to cut the repo rate by 75bp during H1 15. 

The central bank is expected to cut the repo rate another 25bp in H2 15, likely in its policy meeting on 29 September, argues Barclays. Recent public comments from the central bank (eg, Governor Rajan during the Jackson Hole summit at end-August) were more dovish than others in the recent past.

The RBI continues to emphasise that its future actions will remain data dependent. Accordingly, a prolonged period of disinflation and a moderation in inflation expectations could create room for a further 25-50bp of repo rate cuts in H1 16, added Barclays.