RBI Policy Quote by Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities
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Below the quote on RBI Monetary Policy by Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities
"The decision to pause along with no change in stance was in line with our expectation. Expectedly, the focus of the MPC remained on ensuring disinflation on a sustained basis in order to achieve their medium term inflation target of 4%. The RBI does not seem to be too worried about the liquidity situation while asserting that it stands ready to use durable and frictional liquidity management tools to anchor the money market rates around the repo rate. We expect the RBI to continue to focus on fine-tuning of liquidity conditions through VRR/VRRR auctions, in order to gradually align the overnight rates with the repo rate.
The RBI has enough space for holding the repo rate steady, with its FY2025 GDP growth being quite strong at 7% (up from earlier estimate of 6.5%), in order to target the 4% inflation mark. The tone of the MPC was fairly balanced, with adequate focus on reaching the inflation target with a fair degree of comfort on GDP growth. We continue to expect the RBI MPC to change the stance to neutral towards the end of Q1FY25. This is likely to be followed by a shallow rate cut cycle from Q3FY25 onwards."
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