BoAML lists 3 reasons why RBI can cut even if Fed hikes

canada goose outlet jackets canada goose outlet boston Economists, after RBI August 5 monetary policy, believe a policy rate cut canada goose outlet in montreal may be due in canada goose outlet store uk early part of canada goose jacket outlet toronto 2015. But can the RBI really cut canada goose outlet orlando rates if the Fed hikes in canada goose outlet store new york 2015? According to Bank of America Merrill Lynch, the RBI is likely to cut policy canada goose outlet new york rates by 75 100bp canada goose outlet florida starting early 2015 even if Fed chair Janet Yellen hikes from September 2015. canada goose outlet jackets

canada goose outlet in usa This assumption is based on three reasons. Here an excerpt from the BoAML report. canada goose outlet in usa

goose outlet canada Won the RBI have to canada goose outlet london hike to canada goose outlet jackets maintain the current rate differential if the Fed canada goose outlet toronto location tightens? Not really, in our view. We see the RBI cutting policy rates 75 100bp in 2015, although the first cut will likely be pushed to February from our base case December. The rate differential, at 800bp, is already canada goose outlet uk sale far higher than the average canada goose outlet real 460bp since canada goose outlet store near me January 2003. Even in real terms, canada goose outlet legit rate differential, at 484bps, on WPI basis is much higher than the average canada goose outlet in uk of 50bp since January canada goose outlet 2003. canada goose outlet toronto factory On CPI basis, the real rate differential, at 210bps, is also way higher than the official canada goose outlet average of 70bp since January 2003. In any canada goose uk site case, the FII equity portfolio, that responds to growth, at USD 325 billion, is 6.5x of the FII debt portfolio that may respond to interest rates, at USD 50 billion. In fact, the recent experience canada goose outlet store calgary shows that expectations of MTM gains on perceived rate peak off have been a canada goose outlet reviews bigger driver for FII canada goose outlet usa debt inflows. goose outlet canada

canada goose outlet shop canada goose outlet in new york 2. FX reserves key to rupee stability canada goose outlet shop

canada goose outlet store Isn a higher rate differential needed in view of growing external vulnerability? Not with Governor Rajan rebuilding FX reserves canada goose outlet in usa to instil investor confidence. We do not think canada goose outlet in toronto that higher rates can substitute for inadequate import cover. High import cover allowed for a sustainable appreciation of the INR during canada goose outlet locations in toronto August 2006 and April 2008 although the rate differential on average was canada goose outlet vancouver a mere 180bps. canada goose outlet las vegas canada goose outlet store

official canada goose outlet Rising rate differentials, even at 805bps on average, could not prevent depreciation during July 2011 and September 2013 as the import cover halved to 7 months. official canada goose outlet

canada goose outlet black friday 3. Fed tightening will cool ‘imported’ inflation canada goose outlet black friday

canada goose outlet canada https://www.canadagooseoutletcanada.ca goose outlet 2015 canada Finally, doesn a high inflation differential warrant a high rate differential? Fed tightening will itself likely contain inflation by stabilizing commodity prices. Assuming canada goose outlet uk fake normal rains, stable oil prices and a stable rupee, we expect CPI canada goose outlet canada.