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Risk Of An RBI Rate Cut; Key To EM Pricing

Published 03/10/2017, 11:15

On Wednesday the Reserve Bank of India (RBI), policy meeting will be key to EM pricing.

It’s widely expected for the RBI to keep rates unchanged, however, there is a high probability of a surprise rate cut. India’s economic expansions has slowed significantly causing concern with policy makers. A drop in real interest rates despite a rise in upward pressure on inflation, will force the RBI to act. Should the policy meeting stick to expectations, the tone of the statement will likely indicate that an additional policy rate cut is on the table. Any shift in tone or cut combined with narrowing US-India rate spread and uncertainty over EM reaction of fed policy will keep INR weak.

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