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Below Comment On MPC By Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank

“The RBI’s “surprise” pause on the repo rate in April is completely in line with our expectation. In fact, the 6-0 voting in favour of a pause is stronger than our expectation.

With the likely softening of CPI to low- to mid-5% levels in the coming month, the current repo rate of 6.5% implies that India’s real policy rate will hover around 1% during 2023-24, while maintaining a policy rate differential of about 1.5% with the US. This clearly helped the decision of a pause on the repo rate.

In the current EBLR regime of immediate and fuller pass through of repo rate hikes to lending rates, it is heartening to see a more balanced and nuanced approach from the MPC.

The material narrowing of trade and current account deficits and range-bound INR must have offered the MPC better comfort for pursuing a more “Fed-independent” monetary policy.

It was important for the RBI to leave the policy rate at a level, which can be kept unchanged for a long time, as against hiking rates very aggressively now and building up pressure for cutting the same only in few months. ” Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank

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