At its forthcoming meet on Feb 05-07, 2019, the RBI is likely to change its stance from calibrated tightening to Neutral. We think a rate cut at this stage may be a bit premature though there are reasons to back it.
Consistently benign inflation (though core remains high), headwinds to economic growth and nearness to elections at the time of the next meet in April are the main reasons why a rate cut can even be considered now. On the other hand an expansionary Budget may be viewed as having inflationary lag impact thus negating the need to cut rates at this point. Though the US Fed has changed its stance to dovish at its recent meet on Jan 30, it has refrained from cutting rates or laying out a groundwork for the next rate cut soon. While the global rate cut tightening cycle has seemingly come to an end, whether the central banks want to go from rate hike to rate cut so soon will be keenly watched.
(Mr. Deepak Jasani, Head Retail Research, HDFC Securities on his expectations from the upcoming RBI Monetary Policy.)