The Reserve Bank of India has kept key policy rates and its stance unchanged, in line with expectations, according to Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank.
Reacting to the latest monetary policy, Bhardwaj said recent measures, including restrictions on offshore speculative activity and easing geopolitical tensions, have provided some relief to the Indian rupee. This, she noted, gives the central bank room to better assess the evolving impact on growth and inflation, as well as the persistence of the balance of payments (BOP) deficit.
She added that the RBI is expected to remain firmly data-dependent amid the current fluid economic environment. “Given the uncertainty, policy decisions will likely be guided by incoming macroeconomic data,” Bhardwaj said.
On liquidity management, Bhardwaj indicated that the central bank may closely monitor conditions and could introduce Variable Rate Reverse Repo (VRRR) operations. Such measures would help ensure overnight rates gradually move higher within the policy corridor, between the repo rate and the marginal standing facility (MSF) rate.