- Conduct official events in ‘national language’: Minister Harsh Vardhan
- Indian Army reserves right to retaliate, DGMO warns Pakistan
- CCI order in Reliance Jio case set aside by Bombay high court
- In defiance to US, Iran unveils new missile during parade
- Sebi imposes Rs9 lakh fine on ING Vysya Bank’s former official
Even though financial markets were prepared for a no-rate cut policy, the tone of the statement surprised many analysts. The six-member monetary policy committee of Reserve Bank of India has changed the policy stance to neutral from accommodative to give itself more flexibility in the given macroeconomic situation and evolving inflation dynamics.
The headline consumer price inflation is being excessively influenced by lower food prices while the core inflation has remained sticky at around 5% since September. There are also upside risks to inflation due to factors such as rising commodity prices and volatility in global currency markets. The monetary policy committee also wants to see the effect of currency swap on output and inflation.
Overall, the policy stance and the commitment to achieve the 4% inflation target in a calibrated manner will enhance the credibility of the rate-setting committee. However, the shift in the policy stance does not mean that another rate cut in the cycle should be completely ruled out.