“(We see) the growth-inflation trade-off”, said Saugata Bhattacharya, chief economist at Axis Bank. “The focus will be on (liquidity) normalization,” said an Axis report.
“We have to look for signals in its communication,” Bhattacharya said. ” NS reserve Bank of India And this MPC The central bank will look at the liquidity flow over which it has control.
“The growth in liquidity for the year has almost peaked – according to our own estimates,” he said. autonomous liquidity flows FDI And portfolio flows, in addition to external borrowings, have led to autonomous liquidity flows, adding to the central bank’s liquidity management challenges. Global commodity prices remain high and crude oil prices are still rising. System liquidity of around Rs 8.5 lakh crore is also putting pressure on the prices.
“Therefore, it would not be surprising that RBI does something to suck up the excess liquidity in its bid to contain inflationary pressures, as there is a higher exposure to inflation than in recent months,” Bhattacharya said. Which is in view of the prices of fugitive goods.” According to Axis Bank headline CPI is expected to average 5.2% in FY22.
The Monetary Policy Committee has not changed key policy rates since May 22, 2020, when rates were brought down to a historic low of 4 per cent to revive demand and economic activity. Going forward, fiscal policy is expected to play a major role in further growth in the economy. Markets are also watching for central bank signals in the form of a hike in the reverse repo rate.