The Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC), at the end of its review meeting on Tuesday, raised policy rates by 25 basis points (bps). The move comes close on the heels of a 25 bps hike effected in June.
With this, the repo rate stands at 6.50%, the reverse repo at 6.25%, and the marginal standing facility rate at 6.75%. Five of the six members of the MPC supported the resolution.
The decision to hike is based on two factors: i) a sustained and broad-based rise in core inflation (headline excluding food and fuel), reflecting strong demand conditions and ii) future upside risks to overall inflation
The neutral stance notwithstanding, CRISIL believes the RBI will be on hold hereon unless higher-than-anticipated upside risks to inflation from crude oil, stronger demand conditions and food prices materialise.
Upcoming domestic and global data holds the key to further moves.
