DBS expects RBI to make 20 bps rate cut this week

The Reserve Bank of India is likely to cut repo rate this week by half of the 40 bps expected in this quarter, Singapore's DBS Bank said on Tuesday.

"Of the 40 bps cut we expect in this quarter, half is likely this week," said DBS, also noting the significant variation in market estimates from 5.15 per cent to 5 per cent.

"This will lead to a downward revision in the central bank's official GDP projections, which pegged full-year growth at 6.9 per cent (vs market at 5.8-6.5 per cent)," said DBS.

The bank pointed out that 2Q (1QFY20) growth numbers released after the August rate decision, disappointed as the actual outcome undershot official projections by 80 bps.

The RBI monetary policy committee (MPC) meets this week to decide on rates.

The RBI has front run the regional central banks with a cumulative 110 bps cuts in the repo in 2019, the Singapore bank pointed out in a report How many policy rate cuts are left?
A favourable inflation profile and weakness in growth indicators necessitated an accommodative policy stance. With the policy rate now at the lowest since 2010, questions are arising on how low it can go?