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Below the RBI monetary policy reaction by Mr. Ajit Banerjee, Chief Investment Office of Shriram Life Insurance Company

"In what is its last policy meeting of FY24, the MPC has decided to continue maintaining with the policy rates at 6.5% in line with market expectations and maintained the withdrawal of accommodation stance. The rate decision was reached unanimously but the stance was retained by a vote of 5-1. The tone of the MPC was fairly balanced, with adequate focus on reaching the inflation target with reasonable degree of comfort on GDP growth. RBI expects FY25’s real GDP growth to be at 7%. The RBI continues to expect average headline CPI inflation at 5.4% in FY24.

The RBI didn’t appear to be overly concerned about the liquidity situation while assuring that it stands ready to use enduring and frictional liquidity management tools to anchor the money market rates around the repo rate. Therefore, we expect the RBI to continue to focus on fine-tuning of liquidity conditions through VRR/VRRR auctions to gradually align the overnight rates with the repo rate."

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