MOSL: ECOSCOPE-Is this the end of monetary easing cycle?-Even weaker growth is unlikely to nudge cautious RBI
ECOSCOPE: Is this the end of monetary easing cycle?; Even weaker growth is unlikely to nudge cautious RBI
- In line with market consensus, the Monetary Policy Committee (MPC) decided to keep the policy rates on hold today. The decision was taken with a majority of 5-1 votes.
- Interestingly, while the MPC kept its inflation projection for FY18 broadly unchanged (revised slightly from 4-4.5% to 4.2-4.6% for 2HFY18), the GVA growth forecast was cut from 7.3% to 6.7%.
- We believe that while inflation is likely to remain in line with the RBI’s forecasts, there is still a downside risk to its revised GVA growth forecasts. Consequently, although there is a window to cut interest rates, we are highly doubtful if even slower growth would nudge the cautious RBI. Accordingly, the monetary easing cycle may have ended in India, in our view.
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