Improvement in economic scenario could lead RBI to slash rates: BofA- ML Report
By Joseph Samson
Jan 16, 2013
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After the improved performance of Indian economy, as per data on Trade deficit and Index of Industrial Production (IIP), a report released by Bank of America Merrill-Lynch (BofA - ML) states that the worst phase is over in the Indian economic situation.

In the report, the bank expresses confidence in the industrial growth in India and says that the industrial growth may bottom out in the fiscal year 2012-13 following a reduction in lending rates.

In a separate report, BofA - ML states that as the wholesale price index (WPI) for December is going down and was recorded at 7.2 percent, the central bank may reduce rates by 25 basis points in the monetary policy review scheduled to be released on January 29.

On the matter the report says, "We expect the RBI to cut policy rates by 75 basis points by June with inflation likely to ease to 7% in the March quarter. It should also conduct an OMO by March to improve bank liquidity. This should lead to a 25 basis cut in lending rates by March."

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