MPC minutes of the policy review on Dec 8th, saw consensus on: (i) comfort on inflation, (ii) need to be vigilant, (iii) resilience in growth, and (iv) relief from global factors
Download ReportQuantEco Research || MPC Minutes - Calm, but not complacent
RBI’s FY24 growth-inflation forecast of 7.0%-5.4% suggests a Goldilocks scenario. However, caution is warranted amidst heightened uncertainty (food inflation volatility, geopolitical spillovers, etc.) and the need to regain inflation fighting credibility in the post COVID phase. As such, we continue to maintain our call for a prolonged pause on repo rate, until H1 FY25.
We note that there is no explicit relevant discussion by the MPC members on liquidity conditions. This comes as relief as we believed that the earlier reference to OMO sales by the RBI was intended to serve as a surrogate for signalling caution amidst “rising crude oil prices, rising US yields and rising US dollar”, thereby obviating the need for a direct/conventional monetary policy action. With adverse global factors reversing over the last 1-2 months, pressure on INR has subsided. This warrants a gradual organic withdrawal of liquidity surplus (that is underway) rather than actively deploying policy tools to do the same.