Central Bank Holds Status Quo, Signals Cautious Optimism on Growth and Inflation Outlook

The central bank’s decision to maintain a status quo was broadly in line with expectations. It’s reassuring to note that with today’s announcements, the central bank continues to exhibit its focus on the larger macroeconomic picture while continuing to remain watchful of the evolving global scenario. While the central bank too acceded the risks to growth and inflation, relatively resilient domestic economic activity and improved macro fundamentals of the economy continue to provide some respite in an otherwise harsh environment.

 

The measures announced to attract foreign flows by the central bank and the government are a good move and a step in the right direction. Given the narrower interest rate differential between the US and Indian benchmark yields, these measures may of limited help in the near term but they do provide a much needed boost to investor sentiment.