RBI Monetary Policy - Dec 2020 - Views of Shanti Ekambaram, Group President - Consumer Banking, Kotak Mahindra Bank

A steady and growth-oriented policy

In line with market expectations, the Monetary Policy Committee kept key rates unchanged.

While growth is headed in the right direction, it needs to sustain over the medium-term. In addition, recovery needs to be broad-based and will require sustained policy support. Thus, the MPC's unanimous decision to keep rates unchanged despite higher inflation, with a continued accommodative stance for as long as is necessary in the current financial year and the next, is a big positive.

The MPC estimates that core inflation will remain sticky, with CPI likely to be elevated but will trend downwards over the next few quarters up to the middle of FY2022. The system is awash with liquidity and this is likely to continue due to global policies and inflows. The RBI will continue with its focus on "financial stability" and managing flows.

Overall, the policy reflects the current situation and thus, short-term interest rates are likely to remain low given the excess liquidity. Data on growth & inflation, the impact of COVID-19 and global & local factors will drive the direction of the policy over the next few quarters.

Source : Equity Bulls

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