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Below Perspective on RBI MPC Policy Announcement By Ms. Anita Rangan Economist, Equirus

In a surprising move RBI indicated a pause in the monetary policy keeping Repo unchanged at 6.5% with “Readiness to Act should the situation so warrant” with a unanimous vote maintaining stance of “Withdrawal of Accommodation”. Again governor emphasized that the pause is in this meeting only.

With inflation revised downward and growth upwards raising the question of why pause? Four reasons we can think of a) government borrowing program which has just begun needs support b) Currency led by global factors is giving some elbow room to pause c) Watch the Fed policy in May. d) allow some time for genuine transmission of policy hikes done so far.

While there may be many reasons to pause, the fact that RBI has noted their “readiness to act should the situation warrant” and “job is not yet finished” suggests that the pause in all likelihood is temporary. If Fed hikes RBI will be bound to hike once more. The recent oil supply action from OPEC is a reminder of  global uncertainty. There may be room to pause but not led the guard down!

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