While considering a surprise hold by the Reserve Bank of India (RBI) in its latest monetary policy meeting, TD Securities’ Mitul Kotecha pushes back the calls for further rate cuts.
Key quotes
“In light of the surprise decision by RBI to keep policy on hold last week we push back our forecast for rate cuts to February and April 2020 (-25bp each).”
“We think growth risks will not lessen soon while the Consumer Price Index (CPI) will likely peak in Q1 2020 (Q4 FY 19/20) before softening.”
“The impact of higher food prices is likely to dissipate towards the end of Q1 2020 as food prices soften, opening up the scope to resume easing.”
“RBI will need to take account of the government’s Union Budget in Feb but we do not expect it to stand in the way of further easing.”
“Alongside lower policy rates we expect INR to play a role in supporting activity amid a worsening in export performance.”
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