Monetary policy: Is the RBI MPC being too clever by half?

It can be argued, out of common sense, that those who desperately needed liquidity during the pandemic got it, which should prompt RBI to increase the repo rate by a small amount

“When you can’t dazzle them, try baffling them” is a well-known witticism.  And of late, the Reserve Bank of India (RBI) has been espousing this pearl of new-age wisdom.

To put it bluntly, when your words and actions don’t quite match, either you are not clear about what you want to do, or you’re trying to baffle people. This is the inescapable conclusion from the RBI’s Monetary Policy Committee (MPC) action on Wednesday. which decided to retain the repo rate at 4% for the 9th time in a row and retained the reverse repo rate at 3.35%. 

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