Comment on RBI Monetary Policy Reaction by Apoorva Javadekar, Chief Economist, Shriram Group
Below the Comment on RBI Monetary Policy Reaction by Apoorva Javadekar, Chief Economist, Shriram Group
“The RBI delivered a 25 bps repo rate hike as expected; however, it sent a hawkish message by changing the stance to calibrated tightening, citing hardening oil prices, broadening inflationary pressures, and resilient growth. In our view, the decision reaffirms the RBI's inflation-targeting mandate.
The upward revision to inflation forecasts sets the stage for a December hike. On growth, the upward GDP revision carries some downside risk, as the rate hike itself may weigh on private consumption, which is increasingly credit-financed.
The MPC acted prudently on two fronts: holding the CRR steady, shielding smaller banks — which largely did not benefit from FCNR(B) flows — from liquidity pressure; and anchoring the rate action in domestic fundamentals rather than an objective to track global tightening cycles, with Indian yields already among the highest in Asia.”
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