India’s central bank might slash interest rates in December if global challenges keep up and the economy slows down, according to a fresh report from ICICI Bank. This comes as the Reserve Bank of India’s Monetary Policy Committee (MPC) shows signs of a more relaxed approach to support growth amid steady inflation.
The ICICI Bank analysis points to a clear shift in the MPC’s wording that boosts the chances of monetary easing. Back in August, the committee talked about using extra room from low inflation pressures. But in the latest October review, they noted that cooling inflation now offers even more flexibility to boost economic growth—a move ICICI Bank calls a “dovish tilt” toward easier policy.
“Growth takes center stage when inflation stays tame,” the report says. If external headwinds like trade tensions linger and domestic growth starts to weaken, the MPC could move ahead with a rate cut in December.
RBI Governor Shaktikanta Das echoed this during the post-policy press conference, stressing that some space has opened for easing. He added that the committee will weigh various factors before deciding on the next steps at the December meeting.
Adding to the dovish signals, two external members of the MPC voted to switch the policy stance to “accommodative,” hinting at a softer outlook ahead. ICICI Bank sees this as another strong clue for potential rate reductions soon.
On the size of any cuts, the report predicts an initial 25 basis points drop as the most likely step. A second 25 basis points reduction could follow if growth dips more than expected. But it all hinges on incoming data like GDP figures, real-time economic indicators, and updates on global trade issues.
The Governor also touched on recent GST rate cuts, saying they will help lift consumer spending but won’t fully counter the drag from U.S. tariffs on India’s economy.
Overall, with inflation well-managed, the RBI’s room for rate cuts will depend on how growth holds up and external risks play out in the months ahead, the ICICI Bank report wraps up.
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