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Below the Quote on MPC announcement by Siddharth Chaudhary, Head – Fixed Income, Bajaj Asset Management Limited

“The RBI’s decision is broadly in line with our expectations and, in our view, comes at the right time. India was able to stay accommodative for longer because inflation remained benign and growth needed support. However, the backdrop has changed meaningfully over recent quarters. GDP growth has improved, credit growth remains strong, inflation is becoming increasingly broad-based rather than confined to a few volatile categories, and the transmission from producer prices to consumer prices is gradually becoming more visible. At the same time, real policy rates have compressed and the global environment has become less favorable.

With the US dollar strengthening, global bond yields moving higher, and several central banks either tightening or retaining a restrictive stance, emerging markets require a more meaningful positive real-rate cushion to maintain macroeconomic stability. The RBI’s challenge today is not to respond to current inflation, but to prevent future inflation from becoming entrenched. We believe today's move marks the beginning of a calibrated normalization cycle rather than a one-off action. Depending on the trajectory of crude oil prices and global macro conditions, cumulative tightening of 75-100 basis points remains a reasonable possibility. This is about preserving financial stability, anchoring inflation expectations and ensuring that India stays ahead of the curve rather than being forced to catch up later."

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