RBI: Sell-Side Banks See RBI Easing Cycle Commencing in Dec
Sell-side banks see the RBI easing cycle commencing in December. see below for more details.
J.P. Morgan: "All told, if 3Q GDP (which prints on November 29th) is below 7% and 2025 CPI forecast are in the 4-4.5% range – as the central bank currently projects - we expect the MPC to cut rates in December. In contrast, if 2025 CPI forecasts are higher but growth is below 7%, the RBI will have to weigh the relative emphasis on growth versus inflation. Finally, if growth is above 7% and inflation is projected closer to 5%, we think the RBI will push any easing out to 2025. Much, therefore, will come down to how growth and inflation evolve in the coming months."
Goldman Sachs: "Going forward, we expect headline inflation to remain around RBI's target of 4% yoy in Q3 and Q4 FY25 on the back of easing food inflation, which, along with a moderation in GDP growth, should open up room for monetary policy easing by the RBI. We continue to expect a shallow easing cycle of total 50bp rate cuts from the RBI, with 25bp each in the December 2024 and February 2025 meeting."
HSBC: "We believe the recent softness in select fast moving growth indicators (PMI Manufacturing, motor sales, cement production, bank credit, corporate tax collections, GST revenue growth and goods exports) is more representative of sector rotation (from urban to rural) rather than a marked slowdown. Therefore, we think this will be a shallow rate cutting cycle, with an aggregate 50bp in easing. We expect a 25bp rate cut in December, followed by another one in February, taking the policy rate to 6%.
This aligns with our real rate calculation of neutral rates at 1.75% (the average of the band the RBI communicated in the monthly bulletin), and our medium-term inflation forecast of 4.25%."