Quote on the 然BI MPC Announcement' by Piyush Baranwal, Senior Fund Manager, WhiteOak Capital MF
Below the Quote on the ‘RBI MPC Announcement' by Piyush Baranwal, Senior Fund Manager, WhiteOak Capital MF
“Given that RBI had misread the extent of disinflationary forces prevailing domestically as evidenced by successive downward revisions to its FY26 CPI projection, today’s unanimous rate cut of 25 bps is a welcome course correction. This supports our long-held view that the June MPC statement—hinting at the end of the easing cycle—was somewhat premature. That signalling contributed to an unwarranted tightening in monetary conditions as bond yields had hardened across the curve, thus impeding monetary transmission.
Governor Malhotra also emphasized today that policy rates are expected to remain low for the foreseeable future given a very benign inflation backdrop—likely intended to dispel concerns about an impending policy reversal in the coming quarters. RBI further announced liquidity injections of Rs.1 lakh crore via OMOs and USD 5 billion through Fx swaps for December. Together with the rate cut and dovish commentary, this liquidity infusion should aid monetary transmission, as desired by RBI. Notably, a weaker INR is unlikely to derail the RBI’s dovish stance and could even coexist with another potential cut if inflation remains supportive, particularly as currency softness boosts export competitiveness at a time when Indian exports have been pressured by US tariffs
With ongoing FX intervention and the typical year-end tightness in liquidity, additional liquidity measures are likely in Q4. Together with the prospect of Indian government bonds entering the Bloomberg Global Aggregate Index, we expect bond yields to soften further in the coming months. “
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