MPC may go for a cut in December if inflation concerns recede

Ahead of the Monetary Policy Committee’s next statement on Wednesday, most economists are unanimous that it is too early for the ratesetting panel to cut interest rates as some more conviction is needed about the durability of declining inflation. The million-dollar question, for financial markets and stakeholders in the real economy, however, is how much more time it would take for a domestic monetary easing cycle to commence. It seems the wait may not be long.

Out of 12 economists ET spoke to, 9 said that it was likely that the MPC would begin to cut interest rates from December onwards. The remaining three respondents were broadly of the view that the MPC is likely to follow a course that is distinct from rate-setters in advanced economies and may wait for 4-6 months more before cutting rates to be entirely sure that inflation has gone down durably.