MPC will pave way for faster policy normalisation

As the MPC signals normalisation, a key challenge for the RBI would be to ensure that even as sovereign yields rise, the move is orderly

The Monetary Policy Committee (MPC) — in its February meeting — is likely to signal a shift in the policy path ahead, while continuing with a status quo. 

After being in a steady state of decadal-low policy rate for a prolonged period due to the pandemic, the monetary policy has reached an inflection point with a major shift in the global monetary policy setting towards tightening. 

The US Federal Reserve, confronting multi-decade high inflation, has signaled a series of rate hikes in 2022, while the Bank of England has already started raising rates. Domestic economic conditions, however, continue to support an accommodative