Monetary Policy's Dovish Shift: India's Economic Outlook Ahead of December

ICICI Bank has indicated that India's Monetary Policy Committee (MPC) may consider reducing policy rates in December if external headwinds persist and domestic growth slows. The bank's report highlights an increased likelihood of monetary easing, following a notable change in the MPC's policy language.

Earlier, the committee remarked that policy space existed due to a benign inflation outlook, but recent statements now suggest a shift towards supporting growth through potential rate cuts. The bank states the main factor influencing the MPC's decision will be growth, especially if inflation remains low.

Comments from the post-policy press conference further bolstered expectations of a December rate cut, with the Governor hinting at new opportunities for easing. Two external MPC members have voted for an 'accommodative' stance, reinforcing the dovish outlook. ICICI Bank suggests a 25-basis-point reduction is likely, with potential for more if growth sharply decelerates, as indicated by upcoming economic data.

(With inputs from agencies.)