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Analysts at TD Securities now expects the RBI to cut its repo rate for the fifth straight time at its meeting on Friday, October 4 while also maintaining an accommodative stance.

Key Quotes

“At the last meeting held during August 5-7, the RBI cut policy rates by a bigger than expected 35bp to 5.40%. There, they also maintained an accommodative policy stance. The RBI noted that ‘boosting aggregate demand, especially private demand, assumes the highest priority’.”

“We do not think there is a need to be as aggressive at this meeting and look for a 25bps cut. But less need for aggressive cuts The minutes of the last RBI meeting highlighted scope to ease further following the 110bps of cuts so far this year. However, the RBI has mandated banks to link various loans to a new floating rate to improve transmission.”

“This, in our view, suggests that loan costs will lessen, thus reducing the need for more aggressive easing. While we expect at least one more cut from the RBI in this cycle, we think the RBI will indicate that the room for lower rates is becoming more limited.”