The announcement of large liquidity injections into the banking sector demonstrates how the priorities of the RBI – led by new Governor Sanjay Malhotra – have shifted from containing inflation to supporting the weakening economy. This suggests that the repo rate will be cut by 25bps to 6.25% at the conclusion of the MPC meeting on Friday 7th February. In total, we expect 100bp of cuts in the upcoming easing cycle, which is a slightly more dovish view than that of the consensus.
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