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Below the Quote on RBI Monetary Policy Committee By Esha Khanna, Assistant, Sarla Anil Modi School of Economics, NMIMS Mumbai.

RBI retained its current hawkish pause aligning  with market expectations while maintaining an extremely vigilant attitude towards inflation numbers as it slowly moves closer to its target but upside risk still prevails owing to uncertainty of food inflation, recent spikes in fuel prices and persistent geo- political tensions. High interest rates may keep household on edge but unlikely to hurt the major investment and real estate sectors and will lend stability to existing and recently gained momentum displayed by credit growth outpacing the deposit growth of commercial banks. If this resilience in growth outlook continues and inflation also follows a desired trajectory, it is likely that RBI can  change the stance to neutral around august’24. The current decision will help manage the seasonal variation of liquidity conditions in the domestic market through mix of policy instruments viz VRR and VRRR auctions and rupee-dollar movements amid enhanced expectations of rate cut by Fed in coming quarters.  Bond yield and equity premiums are expected to remain stable in near term amid anticipation of strong FII flows and reduction in government borrowings in coming quarters.

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