"RBI's rate setting committee, the MPC, left rates unchanged and even the stance of easy monetary conditions remains unchanged. While this was expected, market may feel initially disappointed as the policy leaves the steepness of the rate curve unaddressed, coming as it does at a time when growth is totally absent.
RBI's caution on rates is driven by the fact that retail inflation is rearing its ugly head with food inflation remaining sticky and higher. RBI therefore expects elevated inflation readings for a few more months, although core inflation is soft. The positive thing is that RBI would continue to be watchful and has not yet cried halt to the easing cycle.
While there was nothing on key policy rates to write home about, a few developmental measures with regulatory tweaks will go a long way in providing stability to key sectors of the economy. Will have to wait and see detailed circular guidelines for the finer aspects of these measures as one of the measures that relates to capital charge on debt schemes of mutual funds could be a game changer."