RBI policy review: Rate cut, adequate liquidity needed to support growth

Guidance on systemic liquidity conditions will be crucial, as the pace of transmission of policy rates depends to a large extent on the level of liquidity

The focus of the Monetary policy committee (MPC) in its June meeting will be squarely on countering the growth slowdown, with CPI inflation almost 1% below the 4% target. Over the last two meetings, the MPC has already reversed the tightening done last year, taking cognisance of the impact of slower global growth on domestic activity. This time around however, domestic growth drivers, particularly private consumption, are showing signs of sluggishness. Among other things, the credit squeeze from the NBFC sector is dragging down economic activity. Moreover, global growth concerns around falling level of trade have resurfaced following the re-escalation