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Below the Quote on RBI MPC reaction from industry leaders Ms. Anitha Rangan, Economist, Equirus

Despite global uncertainties which warrant a close monitoring, RBI chose to keep policy rate unchanged at 6.5% and maintaining its “withdrawal of accommodation” stance. Surprisingly RBI has retained its inflation estimates for FY24 at 5.4% despite marginally increasing Q2 estimates to 6.4% (6.2%) and taking down Q3 to 5.6% (5.7%). FY 24 GDP growth rate remains unchanged at 6.5%. Notably RBI highlighted high inflation as the major risk to macro stability. The high inflation risk is emanating from volatile food and energy prices both domestically and globally, driven by geo-political factors and climate changes. While headline inflation is expected to moderate in the near term, RBI did cite that outlook uncertainty on food inflation comes from lower reservoir levels, lower sowing, volatile global food and energy prices. The positive driver is that core inflation is softening and is critical for keeping the headline inflation lower.

Three statements from the policy gives us a very hawkish outlook a) comment that tight global monetary stance could persist higher than expected b) food inflation pressures may not see sustained easing c) reserves position continuing to decline with the Sept-23 overall having seen ~$12 bn of decline to contain rupee volatility suggest that RBI is on a vigilant watch mode. While batting defensive on a turning pitch, RBI is remaining very careful. As long as currency is maintained long pause is the call. However on a turning pitch, a surprise shot can emerge at any time.”

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