The RBI’s decision to keep the repo rates on hold, but with a “ready to act” message was widely expected since the inflation, driven by vegetable prices, has been on a spiral since June. While the food prices are expected to temper from September onwards, the core inflation remains sticky. RBI’s inflation outlook for a period up to Q1 FY25 has been revised upwards, thus indicating a rate cut is further away in the horizon. Even our domestic economic outlook is robust, the global factors – especially the El Niño factor in September-October period may influence the next year’s crop outlook.
The move to cut the temporary liquidity overhang from the return of ₹2000 banknotes through an Incremental CRR of 10% will help the price stability. These funds are expected to return to the system ahead of the festival season, boosting the domestic consumption.
The central bank has rightly decided to wait for the monetary transmission data from the earlier hikes to take further actions.
• Virat Diwanji, Group President and Head – Consumer Bank, Kotak Mahindra Bank
