The comprehensive approach towards systemic liquidity that the Governor has articulated is very positive and welcome. The higher than normal systemic liquidity deficit had been a matter of concern among market participants. The announcement that the RBI will progressively lower the average liquidity deficit in the system from one per cent of NDTL to a position closer to neutrality significantly addresses this concern. This should support the transmission of RBI’s accommodative policy stance. The reduction in the repo rate signals that overall inflation trends are in line with expectations, and also responds to the Government’s commitment to fiscal prudence.