Markets have rushed to reprice expectations for terminal rate following CPI print of 3.16% in April, now betting on a swift slide in the policy rate towards 5.00%. But that narrative may oversimplify both the nature of India’s disinflation and the strategic recalibration underway at Mint Street. The Reserve Bank of India appears to be frontloading liquidity rather than rate cuts.Governor Sanjay Malhotra’s post-policy clarification that the monetary policy stance provides forward guidance on rates alone, and is not to be conflated with liquidity management, was initially read as a signal of a deeper easing cycle but less-than-easy liquidity conditions.
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