Pivot wait: RBI's monetary policy points to a rate cut in February
The speech made by Reserve Bank of India Governor Shaktikanta Das on Friday started by reminding the audience that the mandate of the Monetary Policy Committee is to target inflation and ensure that it remains within the specified limits. But it is not surprising that this time, two of the MPC members voted for a rate cut, which means that it may not be long before we do see the MPC cutting rates—which is likely to be in February, provided the prevailing inflation rate and inflationary environment look stable. Given that conditions would tighten in the coming weeks, the CRR cut would help tide over tax flows as well as possible volatile foreign portfolio investment outflows. Hence, hypothetically, if projections are not sanguine for, say, inflation, then it can be said that it becomes that much harder to argue for a repo rate cut. Logically, February should see a rate cut, provided India’s inflation numbers look acceptable.
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