Run-up to monetary policy review: Nudging but not rocking the boat

In the April policy, a change to a "neutral" stance will provide the MPC with more operational flexibility to move in case the inflationary pressures intensify

Monetary policy setting is undoubtedly challenging when the growth forecasts have to be revised downwards, but the opposite has to be done for the inflation forecasts as the energy and food price shocks pass through the system. RBI MPC is going to be presented with a similar dilemma in the April meeting. On top of it, while the primary source of the rise in inflation forecasts would be “supply side”, the characteristics of inflation embodied in the 3 P’s of persistence, pervasiveness and perception are now demanding the attention of monetary policymakers. With growth forecasts likely in the range of