New Delhi 07 February (by Vivek S): As a sequel to the liquidity injection measures the MPC decided to cut the repo rate by 25 bps to 6.25% with a neutral policy stance acknowledging the risks to inflation outlook, Chief Economist at Canara Bank has said.
The expert said that MPC has clearly outlined its policy that INR would be determined by market forces and reiterated its commitment to prevent undue market volatility.
By estimating GDP growth for FY26 at 6.7% and CPI inflation at 4.2% there is a clear signal that growth inflation trade off will be well managed. The fiscal roadmap announced by the Government along with the rate cut
sets the tone for a benign interest rate regime. It will also aid in faster monetary policy
transmission.
The MPC has also exhorted banks to be more active in call money market for better transmission of monetary policy signals. Moreover, by proposing the introduction of forward contracts in government securities the MPC has shown a commitment to further deepen the G-Sec market and widen the scope for long term players like pension and
insurance funds.
Overall the policy has achieved a fine balance between growth and inflation while keeping a tab on global scenario. The impact of Rupee depreciation on inflation, however, is something which needs to be watched.
