Quote from Dr. Poonam Tandon, Chief Investment office at IndiaFirst Life

As widely expected, the RBI left the Repo rate unchanged at 6.50% and maintained the stance of focusing on the withdrawal of accommodation (5 out of 6 votes). Likewise, the Standing Deposit Facility rate and Marginal Standing Facility rate were also kept unchanged at 6.25% and 6.75%, respectively. The Governor stated that the fundamentals of the economy remain strong, while core inflation, though softened, remains sticky. On the liquidity front, the Governor added that the system liquidity, as expected, remained tight, and the need for OMO did not arise; however, going forward, government spending may ease liquidity. The Governor stated that the inflation outlook will be impacted by higher food prices, mainly due to key vegetable prices. The CPI for FY 2024 is projected at 5.4%, with a projection of 5.6% for Q3 and 5.2% for Q4, while CPI for the next year (FY 2025) is projected at 5.2% for Q1, 4% for Q2, and 4.7% for Q3, assuming a normal monsoon. The real GDP growth forecast for FY 2024 is revised significantly upward to 7% from 6.5%. The real GDP for the next year (FY 2025) is projected at 6.7% for Q1, 6.5% for Q2, and 6.4% for Q3. The risks are evenly balanced for both GDP and inflation forecasts. Other key announcements include allowing the reversal of LAF under both SDF and MSF on weekends and holidays and enhancing UPI transaction limits for specified categories. The Governor also, at the conclusion, highlighted the need to be mindful of the risk of overtightening, especially when geopolitical shifts are happening, while also not getting carried away with a few months of good data. Overall, the policy tone seemed cautiously positive, with an emphasis on data dependence.