India: MPC likely to defer rate hikes to FY20 – Standard Chartered

According to analysts at Standard Chartered, the recent decline in crude oil prices, lower-than-expected domestic food price momentum, and concerns around global and domestic growth have raised the odds of a prolonged pause by the Monetary Policy Committee (MPC).

Key Quotes

“While we remain watchful of these risks, we maintain our call that the MPC will hike the repo rate by 50bps to 7%. However, we now expect the hikes to be delivered in H1-FY20 (year ending March 2020) versus our previous call of a rate hike before the end of FY19.”

“We lower our FY19 CPI inflation forecast to 4% from 4.6% and correspondingly adjust our FY20 forecast to 4.9% from 5.1%.”

“Given the MPC’s mandate to keep CPI inflation at 4% (+/-2%) on a durable basis and a preference to keep real rates at 175-200bps, we expect repo rate hikes in H1-FY20.”