RBI likely to remain on pause this week and rest of FY2019; lower inflation, full-year growth estimates, says DBS Bank

The Reserve Bank of India (RBI) is expected to remain on pause at the monetary policy meeting, scheduled to be held on December 5, in which it is also likely to revise down its inflation and full-year growth estimate, according to the latest research report from DBS Bank.

Since the RBI surprised with an on hold decision in October, rate hike bets continue to be pared back. Inflationary pressures are abating, mainly due to food, which led October inflation to slip to 3.3 percent, vs target at 4 percent, with an increasing likelihood that November’s will be below 3 percent.

Friday’s Q3 growth numbers saw the economy expand by a slower 7.1 percent y/y, vs 8.2 percent in the second quarter, widening the output gap. There is temporary reprieve on the external front, with rupee appreciating over 5 percent last month and oil prices down by a third between October and November.

"With real rates already at elevated levels, there is little urgency for the RBI to tighten policy," the report commented.