(LiveMint)
We expect the monetary policy committee (MPC) to keep all key policy rates unchanged in the upcoming monetary policy on 8 October. Just like the US Fed has signalled to the market that tapering of asset purchases should not be interpreted as a timing signal for rate hikes, we think the Reserve Bank of India (RBI) will also communicate the same in the upcoming monetary policy. Or in other words, RBI will gradually start the normalization process in the October policy, but do so while keeping the accommodative monetary stance unchanged, thereby delinking its liquidity absorption actions from acting as a timing signal for a potential increase of the policy repo rate in the short term.
