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In line with market consensus, the Monetary Policy Committee (MPC) decided to keep the policy rates on hold today.The decision was taken with a majority of 5-1 votes.
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Interestingly, while the MPC kept its inflation projection for FY18 broadly unchanged (revised slightly from 4-4.5% to4.2-4.6% for 2HFY18), the GVA growth forecast was cut from 7.3% to 6.7%.
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We believe that while inflation is likely to remain in line with the RBI's forecasts, there is still a downside risk to its revised GVA growth forecasts. Consequently, although there is a window to cut interest rates, we are highly doubtful ifeven slower growth would nudge the cautious RBI. Accordingly, the monetary easing cycle may have ended in India, in our view.