The MPC members were united in their decision to maintain a status quo in repo rate at 5.25%
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The RBI published the Monetary Policy Committee minutes of the scheduled meeting held on Feb 6th, which saw maintenance of the status quo on the repo rate (at 5.25%), as well as the monetary policy stance (at neutral). While the decision on repo rate was unanimous, Prof. Ram Singh voted for a shift in the policy stance back to ‘accommodation’.
The MPC members were united in their assessment with respect to the resilience of India’s GDP growth despite the prevalence of an adverse global backdrop. On inflation, most of the MPC members exhibited comfort with the prevailing as well as the projected trajectory of CPI inflation. Going beyond the headline comfort, members also emphasized the softness in the underlying core-core inflation. Overall, most members favoured a data-dependent stance and were looking forward to obtaining clarity from the impending statistical revamp of India’s GDP and CPI data later in the month.
We maintain our view of an unchanged repo rate through FY27. Having said, the central bank could continue to provide support by infusing primary liquidity worth Rs 3 tn in FY27 under the assumption of broad stability in the exchange rate movement. While this would be required for the creation of adequate reserve money to support FY27 economic activity, the RBI is also likely to deploy liquidity-neutral tools like Switches and Operation Twists to help anchor longer-dated bond yields, in alignment with the monetary policy stance. We maintain our view of the 10Y g-sec yield at 6.75% for Mar-26, with a mild upside towards 6.90% by Mar-27.