In an unanimous decision the MPC kept the repo rates unchanged at 6.5% amid worries about global headwinds and domestic inflationary pressures arising out of elevated food prices. All high frequency data indicates resiliency in economic growth across segments resulting in MPC retaining the estimated growth of 6.5%. However given the sharp hike in vegetable and cereals prices inflation trajectory for the year has been revised to 5.4% for the year as against 5.1% earlier. The central bank reiterated its inflation target of 4% and stayed committed to providing adequate liquidity to support growth . For now expect pause for some time unless data shows a different trend. Also global factors – rising crude and Fed’s stance could have a bearing on future rate action. The surplus liquidity in the system on account of government spending, return of ₹2000 banknotes to the banking system, strong capital flows resulted in temporary increase of CRR of 10% . Overall a balanced policy.
- Shanti Ekambaram, Whole-Time Director, Kotak Mahindra Bank Ltd.
