https://www.business-standard.com/opinion/editorial/a-watchful-pause-123081000954_1.html
the revised inflation projection warrants a discussion on the sufficiency of monetary policy action taken so far. The MPC’s revised projection indicates that the inflation rate is unlikely to come below 5 per cent at least till the first quarter of 2024-25. Even as the cumulative repo rate increase of 250 basis points is still working through the system, the MPC will need to deliberate in the coming meetings whether it will be sufficient to attain the 4 per cent inflation target on a durable basis. One of the comforting factors in this context could be the lower rate of core inflation. However, there is always a chance of sustained higher food inflation getting generalised
There is practically no possibility of a rate cut until at least the middle of next financial year
The RBI also did well to impose an incremental cash reserve ratio requirement on the increase in net demand and time liabilities in the banking system between May 19, 2023, and July 28, 2023. This temporary measure is intended to absorb excess liquidity from the system in the wake of the return of Rs 2,000 notes. Excess liquidity in the system can affect inflation outcomes.
Thus, the policy focus should be on minimising the impact of the global slowdown. Although this would require interventions principally from the government, the RBI on its part did well to reiterate its commitment to attain the 4 per cent inflation target and protect financial stability. Both will support long-term economic expansion.
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