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The Reserve Bank of India's commitment to long-term price stability and sustained economic growth remains unwavering, with analysts anticipating another rate cut as early as April - provided inflation continues to trend favourably, according to SBI research.
SBI stated, "April could see the next rate cut again." The policy's clear communication and data-driven approach reinforce market confidence while keeping regulatory scrutiny intact. The central bank has acknowledged that food inflation remains a key factor, influenced by positive indicators like strong kharif production and easing vegetable prices, but also mentioned risks such as adverse weather events. A key highlight of the policy statement is the emphasis on flexible inflation targeting (FIT). The RBI reaffirmed that FIT effectively combines rules with discretionary decisions, ensuring that regulatory measures evolve based on economic conditions. Reflecting this approach, the RBI has deferred the implementation of draft norms for the Liquidity Coverage Ratio (LCR), Expected Credit Loss (ECL), and provisioning guidelines, allowing for further assessment before enforcement. The introduction of forward contracts in government securities (G-sec) is expected to enhance price discovery and liquidity. Allowing physical settlement alongside cash settlement will make bond trading more efficient. The RBI has retained its FY25 inflation forecast at 4.8 per cent, with Q4 inflation projected at 4.4 per cent. For FY26, CPI inflation is estimated at 4.2 per cent. As anticipated, the MPC has unanimously voted to adjust the repo rate for the first time in two years, lowering it by 25 basis points to 6.25 per cent. The committee also reaffirmed its commitment to a neutral monetary policy stance, maintaining a clear focus on ensuring sustained alignment of inflation with the target while fostering economic growth. The RBI Governor highlighted the effectiveness of the flexible inflation targeting (FIT) framework, emphasizing how the central bank has successfully managed to keep inflation within the prescribed range. (ANI)
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