The report indicated that the downward review in the RBI inflation prognosis for fiscal year 26 by 20 BPS, bringing it to the 4 percent objective, has created additional space for monetary asing in the future | Photo credit: Reuters
The minutes of the Meeting of the Monetary Policy Committee (MPC) held from April 7 to 9 reflect a clear tone of mafia, and the growth is now in the center of the stage in the RBI policy approach. According to a Union Bank of India report, the MPC seems safer that inflation gradually moves towards the 4 percent target, which has allowed it to change the approach to economic support.
He said: “The minutes, in line with the policy declaration, are clearly misleading, with a growth gaining a clear priority of politics as greater confidence has emerged with respect to the tools of inflation tendency to the objective of 4 percent.” The report says that RBI’s decision to change the position of monetary policy to “accommodative” was a significant movement, especially a widely expected basic rate (BPS) rate cut (BPS).
This combination, according to the report, acted as a “double reinforcement shot” for the economy. The well -off posture implies that interest rates will probably remain low or may even go further, which supports economic activity by making cheaper loans.
Interestingly, all MPC members agreed to the cutting of fees and the change of posture, except one, Saugata Bhattacharya, which showed some doubt about the change in the position. I preferred to maintain flexible policy. However, most members made it clear that the well -off position simply indicates that an increase in rates for now is unlikely, and that the RBI could still stop if economic conditions demand it.
The report also indicated that the downward review in the RBI inflation forecast for fiscal year 26 by 20 BPS, bringing it to the 4 percent target, has created additional space for monetary ASING in the future.
While the RBI has projected the growth of India’s GDP at 6.5 percent for fiscal year 26, Union Bank feels that this is too optimistic. The report clarifies the 6.0 percent growth, citing weak capital and growing global uncertainty expenses, including commercial volatility and unstable capital flows.
Looking towards the future, the report expects the RBI to reduce the repo rate in another 50 BPS, which reduces it to a terminal rate of 5.5 percent. This projection is based on an assumption of a neutral real interest rate or 1.5 percent.
In general, the tone of the minutes and the report of the Bank of the Union suggest that the Central Bank is prioritizing growth as inflation risks seem to be relieved.
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Posted on April 24, 2025
