Quote on Monetary Policy Committee by Mr. Rahul Bhuskute Chief Investment Officer, Bharti AXA Life Insurance
Below the Quote on Monetary Policy Committee by Mr. Rahul Bhuskute Chief Investment Officer, Bharti AXA Life Insurance
“Pertaining to the repo rate:
RBI cut repo rates by 25 bps today by a unanimous decision – this was widely expected by the market participants and only a small minority was expecting a pause. However, there is no further liquidity measures announced by the governor and as such, market was overall a bit disappointed and bond yields are up by 4-5 bps post policy.
Global banks cutting rates; RBI focusing on inflation:
Inflation in India had been running higher in past few months particularly due to high vegetable prices. RBI was also cautious on spill-over effects of high food inflation on the overall headline inflation and thereby kept the policy rates on pause for a long time, even when global central banks had started cutting. However, now as the vegetable prices have cooled off significantly and the outlook for inflation seems headed towards the Central bank target, RBI has also started its cut cycle with 25 bps cut today.
Key challenges include slower GDP growth, high inflation:
Former RBI governor Shaktikanta Das in his last policy had mentioned the challenge being faced by MPC was to restore the inflation-growth balance – particularly as inflation was then running high while growth had significantly eased with high frequency indicators suggesting continuing slowdown. Now inflation trajectory looks in a comfortable territory and also growth seems to have picked up a bit with increased government spending. Outlook on growth is also moderately positive with the tax sops announced in the Budget to boost consumption. This improved growth-inflation trade-off has allowed RBI to ease policy rates by 25 bps this time, while maintaining a neutral stance.”
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