IGI Logo

Below the quote on RBI Monetary Policy outcome By Mr. Indranil Pan, the Chief Economist at YES BANK

“This policy was on expected lines with no change in the policy rate as also the stance. Even as food inflation and core inflation had been moderating, the RBI rightly desisted from providing any dovish bent to the policy communication. On the other hand, the future guidance was laced with adequate cautionary notes on the inflation trajectory and the risks to the same coming from uncertainties over the kharif output, lower reservoir levels and volatile global crude and commodity prices. And there is a clear reverberation of the previous policy – that the RBI will only be happy if they are able to hit the 4% mark on inflation on a durable basis. And, for now, this seems to be eluding as the RBI themselves have forecasted inflation for the year at 5.4%, with even the Q1 of the next financial year being higher at 5.2%. Given that excess liquidity could be inflationary and can pose risks to financial stability, the RBI has started deploying policy tools from the August policy to remove the excess liquidity from the system. Unexpected by all, the RBI announces that OMO sales also becomes a policy tool for the future in its efforts to suck out liquidity. This is important even from a longer perspective, given that India could be expecting large FX flows in FY25 on the back of JPM bond index inclusion.”

Above views are of the author and not of the website kindly read disclaimer