The Reserve Bank needs to go for a larger rate cut, of more than 25 basis points, in its June monetary policy review to reverse the current economic slowdown, said an SBI research report.
The RBI had cut the key short-term lending rate (repo) by 25 basis points each in its last two policy reviews. The central bank is slated to announce its next bi-monthly policy decision on June 6.
“Are we currently facing a quasi growth slowdown? The apparent nervousness is clearly reflected in the trends exhibited in key stock indices,” said the SBI’s research report ‘Ecowrap’.
As per a report published by ICICI Bank, there is room for the MPC to cut rates (underscored by the growing slack indicated in the diffusion index output gap), in the August policy.