The MPC minutes of policy review in Aug-23 that saw status quo on rates, provide rationale for the policy decision while unveiling few internal deviations in the thinking within the MPC.
Download ReportQuantEco Research || MPC Minutes - Transient inflation spike delivers a hawkish pause
The divide between the hawks and doves continues to persist. While the doves highlight that monetary policy has been tightened adequately to preserve growth-inflation balance, the hawks do not want to pre-commit to any levels on the repo rate in the backdrop of inflation risks and the need for aligning with the 4% target. In our opinion, this divide underscores the economic uncertainty with respect to policymaking. As such, we continue to maintain our call of a prolonged pause in repo rate (through the course of FY24). Traces of hawkishness would continue to be reflected via attempts to curb liquidity surplus, which we believe will be an ongoing exercise rather than a one-off event.