In line with expectations, the RBI left key policy rates unchanged at its monetary policy review in Jun-21, while reiterating its accommodative stance. Growth forecast saw downgrade even as inflation estimates saw a minor upward tweak. The central bank remains committed to provide liquidity support and ensure its targeted distribution. Meanwhile, focus on yield curve management persists. We expect monetary policy status quo to persist until Oct-21. Slow progress towards normalization is expected to commence with gradual upward adjustment in reverse repo rate from 3.35% to 3.75% between Dec-21 and Feb-22, followed by an eventual 25 bps hike in the repo rate in Apr-Jun 2022.
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