The decision of MPC in its just concluded meeting to maintain status quo on the policy rates at 6.50% and continue to retain its withdrawal of accommodation stance on a 5:1 vote was on expected lines. The Governor emphasised that retaining its withdrawal of accommodation stance is to ensure the headline inflation remains within the target of 4 per cent. There was an upward revision in the CPI Inflation forecast for FY24 at 5.4% versus previous forecast of 5.1% assuming that country would receive normal monsoon. The Q2 CPI numbers would be at elevated levels of 6.2% in view of spurt in the vegetable and pulse prices which should subside in couple of months. The GDP forecast has been retained at 6.5%.

Overall, the Governor sounded positive on the macro- economic strengths and resilience shown by the economy, fundamentals remain strong and there was no apprehension raised on the GDP growth aspects of the country. RBI has imposed Incremental CRR (ICRR) of 10 % on deposits received by banks between May 19- July 28. This is a temporary measure aimed at mopping up excess liquidity due to the return of Rs 2000 notes.

Overall, this can be construed as a dovish policy from RBI as chances of any further rate hikes seemed remote, but RBI would keep an Arjuna’s eye for any adverse condition arising out of geopolitical concerns, crude oil price movements, food price movements globally or any other global uncertain event of large magnitude.