RBI policy: Clearly more sanguine on growth, but cautious on inflation

The curious message we get form the statement is that inflation is no longer the only target and we are back to the old days when both growth and inflation were targets for monetary policy

The RBI monetary policy action in the last couple of policies was quite predictable, as inflation has been high and the economy has moved from the ‘lockdown’ to ‘unlock’ phase. This, in a way, has made it easier to take a decision and hence the market should not really be surprised. However, the immediate reaction was a slight upward movement in the 10-years G-Sec.

The Reserve Bank of India (RBI) has been working on the liquidity side to guide interest rates, especially on bonds, as given the large volumes of borrowings by the government, interest rates should have increased. The combination