Perspective on RBI MPC: A Measured Hold by Ms. Madhavi Arora, Chief Economist, Emkay Global Financial Services
Below the Perspective on RBI MPC: A Measured Hold by Ms. Madhavi Arora, Chief Economist, Emkay Global Financial Services
The RBI MPC kept the policy rate and neutral stance unchanged, as expected, while reiterating a data-driven wait-and-watch approach. The policy tone is cautious albeit constructive, balancing uncertainties from the Middle East conflict, tighter global financial conditions, and El Niño risks as against resilient domestic growth and robust FCNR+ inflows.
There were no material changes to growth and inflation forecasts (6.7% and 5% respectively; 10bps higher/lower respectively vs June), with the RBI retaining its emphasis on El Niño risks, while reiterating that any near-term price pressures would largely be supply-driven unless they broaden into second-round inflation effects.
Notably, the risks to both growth and inflation are evenly balanced, signaling an improvement in the macro backdrop since the June policy.
We maintain that the RBI will likely keep rates unchanged in FY27, with the MPC looking through the supply-driven inflation shock.
Additionally, with system liquidity likely to peak in 2QFY27 before normalizing in 2HFY27 as the FCNR+ window closes, the RBI is likely to use temporary liquidity absorption tools rather than tightening its policy stance going ahead.
Above views are of the author and not of the website kindly read disclaimer
