RBI may pause this time, but rate cut likely in December

TIL Desk/Business/New Delhi-A majority of bankers and economists expect the Reserve Bank of India (RBI) to keep key policy rates in hold in its monetary policy review on October 4. The central bank might cut rates by at least 25 basis points in its December review, since, by then, a clearer picture would emerge on the inflation as well as the economic growth trends.

Top bankers, economists, rating agency executives and bond market players participated in the poll, where four out of 10 said there could be a rate cut in October. This is a departure from the last few policy polls, where the participants were unanimous in their opinions on a rate cut or a pause. The October policy will see the imprint of the new RBI governor, Urjit Patel, and the Monetary Policy Committee (MPC).

From now on, the MPC will decide on the policy course as a departure from the standard practice of the RBI governor taking the call in the past. There are three outside members in the six-member committee, whose names were announced by the government last week. The rest are from the RBI. The external members are academics Chetan Ghate, Pami Dua and Ravindra Dholakia. From the RBI, there will be Governor Urjit Patel, Deputy Governor R Gandhi and Executive Director Michael Patra.