The economic outlook has worsened since the August meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI). Decision making for the rate-setting committee, however, would be relatively straightforward this time as it begins the policy review today. The committee is widely expected to increase the policy repo rate. Although analysts expect it to increase the rate by 35-50 basis points, the committee would do well to opt for the upper end of the band because of a variety of reasons. A lower than 50 basis point hike at this stage would reflect reluctance on the part of the committee to take action against sustained high inflation. The inflation rate has been above the RBI’s tolerance band for eight months and is unlikely to come down quickly.
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First Published: Tue, September 27 2022. 22:00 IST