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Below is View on Monetary Policy By Suvodeep Rakshit, Senior Economist, Kotak Institutional Equitie

“The policy decisions are in line with our expectation on repo rate and stance. The rate corridor has now effectively reduced to 25 bps compared to 65 bps earlier. The SDF window will become the new floor at 3.75% even as reverse repo rate is at 3.35%. The policy has decidedly shifted away from being dovish. RBI’s concern on inflation has increased significantly especially with the FY2023 average inflation estimate revised up to 5.7% from 4.5%. The concern on growth is relatively lower in this policy even as FY2023 GDP growth estimate has been lowered to 7.2% from 7.8%. Commitment has also been made to start withdrawal of liquidity from FY2023 and over the next few years. This policy strengthens our view that the first repo rate hike will be in the August policy. We expect the stance to be changed to “neutral” from “accommodative” in the June policy.”

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