Mitul Kotecha, senior emerging markets strategist at TD Securities, notes that the RBI has kept the policy repo rate unchanged at 6.50% in a unanimous vote and maintained its stance of calibrated tightening (with one member voting to move to neutral).
Key Quotes
“RBI forecast CPI at 2.7-3.2% in H2:2018-19 and 3.8-4.2% in H1:2019-20, with upside risks. This is a significant downward revision compared to previous forecasts and will likely vindicate the recent pull back in tightening expectations.”
“Despite the downward revisions, RBI noted that core inflation remains sticky and that the output gap remains virtually closed. While we think risks are still towards the next move being a hike there are now clearly growing risks of a prolonged period of unchanged rates.”
“The growth outlook has not changed despite the weaker Q3 GDP outcome (7.1% y/y), with the RBI predicting growth at 7.4% for 2018-19 and 7.5% for H1:2019-20, with downside risks.”
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