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The broad contours of policy normalisation

We’ve argued for some time that the RBI is in no rush to join several of its emerging market peers in tightening monetary policy, a view that has been reinforced by the dovish commentary in the latest RBI bulletin released this week. The bulletin also hints that, whenever it does begin, policy normalisation will be very gradual. We think it will start with the slow removal of liquidity support before rates are increased.

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