In the forthcoming mid-quarter monetary policy review, RBI is likely to keep both policy rates and CRR unchanged. Going by the central bank’s guidance in recent months, containing inflation and inflation expectations remains the dominant policy objective despite the deterioration in economic growth prospects. Therefore, since headline inflation remains elevated and may inch higher in the coming months due to a likely rise in agri-inflation, we do not foresee RBI easing interest rates. At the same time, as the liquidity situation has improved considerably in recent months, a cut in CRR is also unlikely.
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