Quote/Viewpoint on RBI Monetary Policy Announcement by Mr. Madan Sabnavis, Chief Economist, Bank of Baroda
Mr. Madan Sabnavis, Chief Economist, Bank of Baroda on RBI monetary policy announcement.
“The credit policy has surprised the markets with aggressive changes in projections for both GDP and inflation. For GDP growth it is 7.2% (Bank of Baroda: 7.4-7.5%) while inflation has been increased to 5.7% (Bank of Baroda: 5.5-6%). There is a clear hint that the accommodative stance though retained will change as there will be a gradual withdrawal of liquidity keeping in mind the trends in inflation. The interesting introduction of the SDF notwithstanding the high level of bonds held by RBI does indicate that the overnight reverse repo would no longer be attractive as the SDF gives higher return. These are clear indications of the repo rate being increased during the course of the year and we do expect at least 50 bps increase this year. The markets have already reacted with the 10-year bond going up past 7% and we expect the rate to go up to 7.25% this year.”
– Madan Sabnavis, Chief Economist, Bank of Baroda
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