Implication for next moves
• Near‑term (next 1–2 MPC meetings): RBI will likely hold rates and keep doing liquidity absorption.
• Only if:
• Surplus liquidity shrinks toward neutral
• Inflation stays comfortably below 4% for several months
• Growth risks intensify significantly
…then RBI could cut another 25 bps in late FY26.
• But the bar for further cuts is now higher than it would be in a tight liquidity environment.
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In short:
Excess liquidity acts like an invisible rate cut. If RBI adds another real rate cut on top of that, the economy could move into an over‑stimulated zone, risking inflation and asset bubbles. That’s why RBI will focus on liquidity absorption first, rate cuts later.
By: via AlliesFinServe #StockMarket #Bharat Telegram.me/AlliesFin
