RBI to step up forex buying: Report

Taking into consideration the latest Federal Open Market Committee meeting, the US Fed should withdraw liquidity from September.

According to a report by the US economists of Bank of America Merrill Lynch (BofAML), the Reserve Bank of India (RBI) is likely to step up forex buying and could as well go for a 25 basis points cut in interest rate on 2 August.

Taking into consideration the latest Federal Open Market Committee (FOMC) meeting, the US Fed should withdraw liquidity from September.

“We expect the RBI to recoup forex reserves with our US economists now expecting the Fed to withdraw liquidity from September,” BofAML said in a research note.

Commenting on the central bank’s policy stance, a 25 basis points or 0.25 percentage point rate cut in August is expected as the next Fed hike is expected only in December, the report added.

“On balance, we continue to expect the RBI to cut 25 bps on August 2, as our US economists now expect the Fed to push out the next hike to December. Withdrawal of Fed liquidity should also contain global commodity prices and by extension, ‘imported’ inflation,” it said.

 
Source: PTI

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