By:- Khushali Dutt, associate economist at Equirus Securities.
“The RBI kept the policy rate unchanged at 5.25% as expected and maintained its neutral stance. However, this policy was more about the narrative and the structural measures to attract capital flows. In tandem with the government’s capital gains relief to FIIs represent an episode of well-coordinated monetary and fiscal policy. The confluence of an upward inflation trajectory with Q3 FY27 CPI projected at 5.9% and upside risks from a sub-normal monsoon and El Niño a global central bank tightening cycle that narrows the RBI’s own room for inaction, and the explicit flagging of second-round effects in today’s statement collectively point toward a hiking cycle this year. We expect the RBI to hike by 50 bps in FY27 and a Repo rate of 5.75% by fiscal end”.