Key Points

The report highlighted that the odds of further monetary easing have increased following a noticeable shift in the MPC's policy language.

In the August policy, the committee had noted that "monetary policy has used policy space created by benign inflation outlook." However, in the October review, this language shifted to "sobering of inflation has given greater leeway for monetary policy to support growth," which, according to ICICI Bank, marks a dovish tilt.

It stated "The most important determinant factor deciding the trajectory of rate cuts is growth when inflation is benign. If external headwinds remain and growth starts to decelerate, MPC is likely to go ahead and cut rates".

Comments made in the post-policy press conference further supported the possibility of a rate cut.

The Governor emphasized that "some room has opened for easing and depending on a number of factors, next action will be decided in December."

The report also highlighted that two external members of the MPC voted in favour of changing the stance to "accommodative," signalling a dovish bias in the policy outlook.

This, ICICI Bank observed, is another key indicator of possible easing in the upcoming December policy.

On the quantum of rate reductions or the likely terminal rate, the report assessed that the current space looks to be for a 25 basis points cut.

A further 25 basis points reduction may be possible if growth slows more sharply from its present trajectory. The evolution of this outlook, however, will depend on upcoming GDP prints, high-frequency indicators and developments in the external trade environment.

Meanwhile, the Governor also shared that while the recent GST rate cuts would provide support to consumption, they would only partially offset the negative impact of US tariffs on the Indian economy.

The report concluded that while inflation remains under control, growth dynamics and external challenges will determine the extent of easing that the RBI can deliver in the coming months.

- ANI