HDFC Bank Chief Economist Abheek Barua reacts on RBI’s monetary policy
Chief Economist, HDFC Bank, Abheek Barua said that the RBI kept its policy rate unchanged as expected at 6.5% but its message was clearly hawkish.
“This was reflected in the upward revision in Q2 FY24 inflation forecast by 100bps to 6.2% and the decision to tighten liquidity through the incremental CRR for banks. The latter could reduce system liquidity balance by INR 60-70K crores. While the ICRR decision is to be reviewed in September and could be a temporary decision but if inflation pressures linger on, the possibility of continued durable liquidity tightening is likely.”
He said that the RBI reiterated its resolve to bring inflation back to 4% on a sustainable basis and highlighted risks beyond the transitory vegetable price pressures. We expect inflation to average at 5.6% in FY24 with inflation expected to print above 6% till September. [KNT]
