RBI monetary policy: Wider output gap drives fifth consecutive rate cut

Although the transmission of monetary easing undertaken so far has been staggered and incomplete, it is expected to improve going forward.

In line with our expectation, the monetary policy committee (MPC) reduced the repo rate by 25 basis points (bps) to 5.15 per cent in its October 2019 policy review, bringing the total magnitude of easing so far in this cycle to 135 bps, over the course of 2019. The MPC unanimously voted to reduce the policy rate and maintain the stance as accommodative, even as one of the members voted for a larger rate cut of 40 bps.

The widening of the negative output gap paired with the relatively stable retail inflation prints in the recent months, as well as