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INDIA: Commerzbank Expect Unchanged Rates in Dec and Possibly in H1-2025

INDIA
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  • Commerzbank believe that the RBI is unlikely to panic following the increase in headline inflation in October as it was mainly due to higher food prices and is likely to be transient.
  • On monetary policy, they note that the RBI has given few signs of a rate cut anytime soon. The recent uptick in inflation justifies its cautious stance, particularly given persistently strong domestic demand and cost pressures. They expect RBI to keep rates unchanged in December and possibly in H1 2025.
  • Commerzbank say the main aim of RBI intervention has been to ensure sufficient liquidity, INR stability, and to shore up investor confidence. However, they don't foresee any panic signs from RBI because FX reserves remain at healthy levels at around USD658bn. This translates to an import cover of around 11.2 months, well above the benchmark of around 3 months. This gives the RBI room to manoeuvre to defend INR, Commerzbank add.
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  • Commerzbank believe that the RBI is unlikely to panic following the increase in headline inflation in October as it was mainly due to higher food prices and is likely to be transient.
  • On monetary policy, they note that the RBI has given few signs of a rate cut anytime soon. The recent uptick in inflation justifies its cautious stance, particularly given persistently strong domestic demand and cost pressures. They expect RBI to keep rates unchanged in December and possibly in H1 2025.
  • Commerzbank say the main aim of RBI intervention has been to ensure sufficient liquidity, INR stability, and to shore up investor confidence. However, they don't foresee any panic signs from RBI because FX reserves remain at healthy levels at around USD658bn. This translates to an import cover of around 11.2 months, well above the benchmark of around 3 months. This gives the RBI room to manoeuvre to defend INR, Commerzbank add.