“The RBI hiked the policy rate by 25 bps while changing its stance to a calibrated tightening, while revising up both growth and inflation estimates. With FY27 GDP growth estimated at 7.1%, the economy has room to absorb tighter policy, and the RBI is right to act as inflation becomes increasingly broad- based. Even after today’s hike, the real policy rate remains negative at around –40 bps, given CPI is projected to average 5.9% over the next two quarters. This points to further tightening ahead. However, we don’t expect it to embark on an aggressive hiking cycle considering elevated yields and liquidity absorption measures, and the central bank will be wary of front-loading hikes into a growth outlook that, while strong, is not immune to external shocks”.
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