3 min read.Updated: 11 Feb 2022, 12:39 AM ISTB. Prasanna
MPC surprised the markets by holding rates and keeping the commentary dovish
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The Reserve Bank of India’s (RBI’s) monetary policy came in an environment of rising bond yields, hawkish pivot by the US Federal Reserve and the Bank of England, and the budget that surprised the bond markets by a higher-than-expected gross borrowing. The market consensus was that this policy would begin the normalization of the ultra-easy policy path set by the MPC post covid. The committee, however, surprised the markets by holding on to all rates and keeping the commentary dovish. The MPC held on to its earlier growth forecast of 7.8% for FY23. Buoyant exports, pick-up in capex by way of public spending and schemes such as performance-linked incentives (PLI), and recovery in contact intensive services sector as virus wanes should deliver these projections. In fact, we believe growth can be higher at 8.2%, given the uptick visible in the real estate sector and job momentum in the IT sector and startups.
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