RBI surprises with status quo on key rates, less concern on currency

Docile food inflation would mean that the MSP has not worked and this is where the irony lies

The RBI has sprung a surprise by not altering the interest rates or lowering the cash reserve ratio (CRR) at a time when inflation appears to be moving up and liquidity tight. At the same time the perspective on growth for FY19 remains unchanged with 7.4% projection remaining intact. This calls for some discussion.

As inflation is the main target for the Monetary Policy Committee (MPC), the view is that the inflation projections for Q2 have changed downwards to 4% from 4.6% and to 3.9-4.5% for H2 from 4.8%. There are strong underlying assumptions where there could be a differing