RBI maintains status quo on monetary policy rate along with the stance with repo rate at 6.50% and a continued focus on “withdrawal of accommodation”
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In line with expectations, the RBI maintained status quo on monetary policy rate along with the stance. As such, repo rate remains unchanged at 6.50% with policy stance continuing to focus on “withdrawal of accommodation”. The central bank retained its FY24 GDP growth and CPI inflation forecast at 6.5% and 5.4% respectively. Surprisingly, the RBI Governor said that the central bank would seek to actively curb liquidity surplus via g-sec sales rather than rely upon organic factors (like currency in circulation) to do the job in a gradual manner. This emphasis on hawkishness underscores RBI’s desire to follow a proactive liquidity management approach rather than a passive one. As such, while we continue to expect repo rate to remain on pause at least until Q1 FY25, we now revise up our 10Y g-sec yield for Mar-24 to 7.00% from 6.90% earlier.