Rate cut likely in December amid continued concerns on inflation and geo-political crisis: Economists

New Delhi [India], October 9 : As the Monetary Policy Committee (MPC) of the Reserve Bank of India opted to keep key rates unchanged on Wednesday, leading economists and industry leaders have shared their insights on the central bank's current stance and the potential trajectory of interest rates.
Dharmakirti Joshi, Chief Economist at CRISIL, noted that while the MPC has adopted a 'neutral' stance, it chose to keep the policy rate unchanged.
Joshi said, "This signals circumspection, it also underscores the likelihood of a rate cut in December. The outsized US Federal Reserve rate cut of 50 basis points in September marked complete and a decisive turn in monetary policy among major central banks. Yet, for emerging market peers, domestic inflation concerns are at the front and centre."
He further added, "Globally, risks and uncertainties persist, with escalating tensions in the Middle East, weather uncertainties and outcome of US elections in focus. Reason why the RBI took a cautious approach and kept its powder dry."
Anshuman Magazine, Chairman & CEO for India, South-East Asia, Middle East & Africa at CBRE, highlighted the RBI's balanced approach in maintaining the repo rate.
He said, "The RBI's decision to hold the repo rate steady reflects a balanced approach between achieving economic growth and managing inflation levels. As we approach the festive season, the decision is likely to support the sector's ongoing momentum."
"The strong performance in the first half of 2024 across most real estate segments, coupled with a seasonal peak in activity, indicates that the real estate sector is well-positioned for continued growth during this period," he added.
Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, stated that the RBI's decision aligns with expectations.
She said, "We continue to expect the onset of rate easing from December with a 25-bps cut but the scale of easing in this cycle is expected to be shallow with limited scope for back-to-back easing in each policy."
Rajeev Radhakrishnan, Chief Investment Officer, Fixed Income at SBI Mutual Fund, commented on the evolving growth-inflation dynamics.
He said, "From a near term perspective, the policy focus would likely remain attuned to address the skewness in system liquidity and any potential financial stability risks".
Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares and Stock Brokers, said, "While the overall outlook for both inflation and growth remains positive, upside risks are emerging from evolving geopolitical tensions in the Middle East, as well as unexpected weather shifts--both of which are tail risks that the central bank continues to monitor."