Madan Sabnavis, Chief Economist, Bank of Baroda
“The surprise element in the credit policy is the very dovish stance taken by the MPC which in a way supports the expected large government borrowing programme as well as the corporates that will be borrowing funds this year. The take on inflation is fairly aggressive for FY23 as the forecast of 4.5% assumes that the oil economy remains stable, which is probably the biggest risk today. The forecast for growth is slightly less sanguine than the government, which forms the basis for taking a rather conservative view on the durability of growth. This all means that the indication is that as of now it looks like the repo rate will not be increased in FY23 unless the numbers turn really adverse.
The RBI has not spoken of withdrawing surplus liquidity but in bringing in predictability on managing the same by using the V3R route to stabilise the same. And this is something which is important because the market is always trying to predict the RBI action and by providing guidance, the message is clear. The impact on the market has been more than soothing as the 10 year yield has come down and will probably remain in the stable region of 6.75-80% in the near term.
Venkatraman Venkateswaran, Group President & CFO of Federal Bank
RBI surprised the market by continuing its “accommodative stance” and not increasing the reverse repo rate, which was widely expected. RBI continues to prioritise growth over inflation and at the same time acknowledging risk to inflation. They have adopted a cautious stance and to support recovery of the economy. The inflation projections appear optimistic given the rising oil prices and supply side constraints.
Indranil Pan – Chief Economist, Yes Bank
The RBI has provided the market with a very dovish policy —more so than expected by market. Growth concerns continue to play a bigger role than inflation for RBI. In terms of its forecasts on inflation, RBI indicates a glide path for inflation going down to the 4% handle in Q3 and Q4 FY23. While the RBI contends that the growth momentum remains positive, the stance however indicates that the RBI is willing to wait longer to see the growth becoming durable and sustainable.
For now, the RBI has decoupled itself with the monetary policy momentum in the rest of the world, where higher inflation prints are leading to central banks of the developed economies to tighten rates. We believe that RBI may be able to hold back repo rate increases for longer and may not have any compulsion to follow global central banks unless their actions have any severe implication on the USD/INR rates. We foresee 2 repo rate increases in FY23 but predicting a timeline is difficult at this point.
Rajni Thakur, Chief Economist, RBL Bank
“With continued accommodative stance and putting any rate action on hold, RBI is walking the Talk of its “durable growth” focus. Growth projections for the next fiscal year at 7.8% reflects our concern on demand uncertainties in the second half while inflation projections at 4.5% for 2022-23 is lower than our expectations. Though high oil prices and supply issues were mentioned as risk elements, MPC’s inflation trajectory trends lower in H1 FY23 thereby ‘providing room to remain accommodative’.
Since the large government borrowing programme for the next year that has been pushing up the bond yields doesn’t find a mention yet, it’s likely that RBI is trying to buy time and focus on managing rates expectations for the remaining two months of current fiscal year for now. The signalling is quite clear in this meeting that despite global rates inching up and upwards risks on inflation levels, RBI will tilt towards dragging its feet on rates normalisation well into the next fiscal year as well while continuing with its liquidity management steps.“
Samuel Joseph, DMD, IDBI Bank
“MPC has again surprised the pollsters. By leaving the rates unchanged and continuing the accommodative stance and more importantly the guidance for 2022-23 inflation at 4.5%, the policy is extremely positive for the markets. The divergent monetary policies across the globe could throw up surprises going forward, which could be tackled in the April policy”.
The views and opinions expressed are not of IIFL Capital Services, indiainfoline.com
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