Reaction Comment on RBI Monetary Policy by Naval Kagalwala, COO & Product Head, Shriram Wealth ltd
Below the Reaction Comment on RBI Monetary Policy by Naval Kagalwala, COO & Product Head, Shriram Wealth ltd
“The RBI led MPC unanimously maintained the policy rates, while also continuing with a neutral policy stance (though two external members voted to change the stance to accommodative).
The inflation outlook was classified as more benign, given a sharper than expected fall in food prices, improved supply conditions, GST rationalisation, with core inflation also expected to remain contained. The FY26 headline inflation was revised to 2.6% (from 3.1% as per Aug MPC meeting), helped by satisfactory south-west monsoon, comfortable buffer stocks, good progress of kharif sowing and adequate water reservoir levels. The real GDP growth for the ongoing financial year was revised to 6.8% from 6.5% earlier - aided by brightened prospects of agriculture, rising capacity utilisation, conducive financial conditions, with recent GST announcements said to enhance consumption.
The governor acknowledged deterioration in external environment given ongoing tariffs and trade policy uncertainties but reiterated confidence around meeting external obligations. Concerns around recent INR depreciation was also noted, with governor assuring of taking appropriate steps as warranted. The statement noted policy transmission across sectors, with further support likely from improvement in liquidity conditions from drawdown in GOI cash balances and durable liquidity injection from forthcoming CRR cuts.
Following the outcome, G-sec yields edged higher along with paying in the OIS segment, as a segment of market was expecting policy easing. While there was no clear guidance on roadmap for policy easing, the committee emphasised to wait for the impact of policy actions along with greater clarity around trade related uncertainties before charting the next course of action. However, the statement also noted that the current macroeconomic conditions had opened up policy space for further supporting growth - hinting at policy easing in any of the forthcoming meetings. “
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