Quote on Expectation Monetary Policy Committee meet By Mr. Rohin Agarwal, Avener Capital
Below Quote on Expectation Monetary Policy Committee meet Mr. Rohin Agarwal, Vice President at Avener Capital
"In the February meeting, most of the MPC members were worried about core inflation. Since then domestic CPI inflation has remained elevated above 6% for the last two months. Additionally, the upside risks to food inflation exist due to unseasonal rains and in case there are El Nino led disruptions. On the other hand, the banking crisis in the US and Europe and the slowing growth outlook might also be considered by some members of MPC while taking a stance on rate hike. There have been increasing concerns that rapid rate hikes by central banks have been a major driver for recent failures in small banks of the US and EU. Thus, RBI will have to balance its commitment towards taming inflation while ensuring that India's financial system is not exposed to extraordinary shocks. The expectation around Fed revisiting its aggressive stance on inflation will also be a consideration for RBI. Another 25-bps rate hike with a stance change to neutral looks like the most likely outcome. The market will also look for the RBI’s position on liquidity conditions. The banking system liquidity deficit is likely to increase during the April-June period. In absence of liquidity support from the RBI, the short-term rate can move higher meaningfully."
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