Beyond the rate decision

RBI will have to address the excess liquidity issue

The interest rate decision will be relatively easy for the Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC), which will meet this week to review the policy. No one in the market expects the rate-setting committee to touch the policy rate, and the reasons for maintaining a status quo are fairly clear. The consumer price inflation rate has been running above the target band of the central bank for months. In normal circumstances, it would have perhaps warranted a tightening. Retail inflation was at 7.6 per cent in October. But at a time when output is contracting, the MPC