Speculation is mounting that another rate cut is in the pipeline. Markets will be critically assessing economic data releases ahead of the next rate decision on 25 March.
Given the generous degree of monetary policy accommodation in the system, our econometric analysis suggests that the data will have to be extraordinarily weak to augment the case for another interest rate cut.
Probabilities of a rate cut are estimated for a range of indicators and their outcomes ahead of the next MPC meeting. We also flag the risk of pipeline price pressures that may arise as a result of the change in the inventory cycle and concomitant availability of credit within a loose policy environment.
The Finance Minister will also address inflation targeting next week. In all likelihood, inflation targeting will remain the status quo.
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