Liquidity will come back but RBI will keep it in deficit for the time being: Jayesh Mehta

economictimes.indiatimes.com:

Jayesh Mehta, MD & India Country Treasurer, BoA, says for the time being, RBI MPC would like the overnight rates to be more towards MSS rather than the repo rate. It looks very clear. The market had expected that to continue. In fact, people were expecting all kinds of stuff including CRR hike, more VRRR and stuff like that.
How are you analyzing the liquidity situation? ICRR is gone now. We are heading into a festive season where demand for cash in circulation goes up. What is your assessment?
We do expect that liquidity will come back.

Of course, with festivities, some liquidity will go. They are very clear that they keep it in a deficit for the time being. They may want to see the next inflation print is going as per their trajectory and stuff like that.

But for the time being, they would like the overnight rates to be more towards MSS rather than the repo rate. It looks very clear. The market had expected that to continue.

In fact, people were expecting all kinds of stuff including CRR hike, more VRRR and stuff like that.
But I do not think they have done anything there. The only surprise is that I am not surprised but the market is surprised, it is like the OMO sales and recreation of 4% target.

Maybe with the way, like, you know, the global, there are many balls, many things they have to face global. There is so much uncertainty. You do not want to come out with status quo policy, you need to be a little bit hawkish.