Perspective on RBI MPC by Ms. Madhavi Arora, Chief Economist, Emkay Global Financial Services
Below the Perspective on RBI MPC by Ms. Madhavi Arora, Chief Economist, Emkay Global Financial Services
“RBI hiked policy rates by 25bp and adopted a cautious tone, while the change in stance to another new nomenclature “calibrated tightening” felt more like a forward guidance than a policy stance per se, but has prepared markets for a higher-for-longer interest rate environment.
With US rates and growth higher and inflation proving stickier, India may need to offer a meaningly higher risk premium, particularly amid elevated global volatility, high oil prices and lacklustre natural dollar inflows. Global financial conditions could thus increasingly dictate the RBI’s reaction function, alongside growth and inflation dynamics.
From a signalling perspective, while the policy rate and liquidity stance will both incrementally tighten ahead, system liquidity is likely to remain >1% of NDTL by end-Mar’27, even with RBI’s liquidity absorption in coming months. We maintain a cumulative rate hike of 75bp in this cycle, but will be watchful of the fluid global dynamics.”
Above views are of the author and not of the website kindly read disclaimer
