Post-RBI policy view: Parijat Agrawal, Head – Fixed Income, Union Mutual Fund

As expected MPC kept the policy rate and stance unchanged. The softening of core inflation gives sufficient room to MPC, however volatile food inflation and recent uptick in crude and other commodity prices is to be watched and MPC kept the full years projection at 4.5%. The strong momentum in growth also gave comfort to MPC to align the CPI on a durable basis to 4%. We expect rate cuts in 3rd quarter of FY 25, possibly after US FOMC starts rate cut cycle. RBI is expected to keep liquidity neutral so that further transmission of higher rates can continue. There is possibility of modification of LCR framework going forward which may augur well for bonds.