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ICICI Bank Global Markets expects another rate cut in December

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ICICI Bank Global Markets expects another rate cut in December

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The October 2019 MPC minutes could be read as dovish, opening up space for another cut in December, said ICICI Bank Global Markets in its research report.

ICICI Bank Global Markets expects another rate cut in December
Minutes of the Reserve Bank of India's Monetary Policy Committee meeting in October indicated that the central bank could cut key benchmark rates further in December, said ICICI Bank Global Markets in a research report.
The key highlights of the MPC minutes pointed out four key things: i) concerns on protracted demand-based growth slowdown with global headwinds; ii) weak monetary policy transmission which could see some improvement with a lag as well as with the added impetus of external benchmarking of lending rates; iii) confidence on the future trajectory of headline inflation with expectations of it to remain below the target of 4 percent until Q1 FY2021; and iv) fiscal situation requiring monitoring.
The brokerage said the economic growth is expected to average marginally above the 4 percent mark over the next three quarters.
The report added that the brokerage expects the MPC to vote for a rate cut in the December policy, at the back of weak growth numbers as well as focus on policy continuity to enable monetary policy transmission and coordinated fiscal and monetary policy action to support growth,
Moreover, RBI Governor Shaktikanta Das will continue to keep "the accommodative stance as long as it is necessary to revive growth while ensuring that inflation remains within the target”.
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