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

“There were no surprises in the policy from the rates and the stance perspective. It is more or less a cut-paste from the previous policy except that the growth estimate is hiked to 7% from 6.5% earlier. On the other hand, there has been no change to the inflation forecast for the current financial year. However, the RBI consistently, and as also in previous policies, harped on the volatilities to price stability from the food side. The governor warns that the RBI would unlikely lower its guard on inflation and one or two months of positive data on inflation does not, therefore, allow them to chance the course of monetary policy. The problem for the RBI is that inflation continues to refuse to come down towards the 4% target and the earliest that it may do so, as per the RBI’s own projections is in Q2 of the next financial year. Thus, it may be safe to say, and keeping in mind the credibility of the central banker, there is unlikely to be any chance of a rate cut till that time, unless of-course something dramatically changes. The RBI sounds out again the issue of financial stability and the importance of the same. This explains the recent actions of the RBI towards increasing risk weights of some categories of the personal loan. While liquidity has taken center-stage in terms of policy announcements over the past two policies, there were no fresh announcements today on the liquidity front. Further, tensions on an imminent OMO was taken off and may be used only if liquidity flows turn out to be humongous in light of the bond market inclusion related flows.” 

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