Attribution: Shubhada Rao, Chief Economist, YES BANK
365telugu.Com, Online News, India, February 7, 2020: “RBI’s final monetary policy review for FY20 was well in line with expectation, viz. maintaining a status quo on policy rates while maintaining an accommodative stance. Accelerating CPI inflation well above the upper bound of the indicative band of 2%- 6% along with muted though marginally improving growth conditions in the economy prompted the action. Going forward, the near term outlook for inflation remains worrying led by protein-items inflation and price pressures emanating from services sector. The growth inflation dynamic is likely to improve towards Q3FY21. This is in line with our own expectation. As such, we maintain our call on a status quo on policy rates until September 2020 with a space opening up for a 25 bp rate cut in October 2020 monetary policy review, assuming a normal monsoon. In addition, the RBI has extended the regulatory forbearance for MSMEs and CRE sectors. Furthermore for housing and automobile sectors incremental bank credit has been incentivized. This bodes well for overall improvement in credit appetite.”