The RBI is likely to cap its record interest rate cutting sphere with another 0.25 percentage points reduction in December before hitting a pause button, according to brokerages.
The RBI Monetary Policy Committee (MPC) reduced repo rate by 25 basis points on Friday to 5.15 per cent and decided to maintain the accommodative stance "as long as it is necessary to revive growth, while ensuring that inflation remains within the target".
"We see a high probability for the RBI MPC to deliver a final 25 basis points cut to bring the repo rate to 4.9 per cent in December. It would be consistent with our forecasts of an additional rate cut by the (US) Fed in October," Goldman Sachs said in a report post Friday's decision.
It expected the easing cycle to pause after the December meeting due to expectation of headline consumer price inflation to stand at close to 4 per cent diminishing a case of further rate cut, and the MPC may wait to see the monetary easing cycle, as well as the series of announcements by the government, filter through the economy.
"What would it take for the RBI to pause or end the easing cycle before the December meeting? We suspect it would require better high frequency data on economic activity, and a significant improvement in the global environment.