This comes after RBI MPC decided unanimously to hike the repo rate by 25 bps to 5.5% in the October MPC. The next RBI MPC meeting is scheduled for December 2-4.
The RBI stated that inflation and its outlook are not benign as it was last year with headline CPI expected to average almost 5.8 per cent in the next three quarters and core inflation projected at 4.4 per cent this year. The apex banks said recalibrating the policy rate was imperative.
RBI Governor Sanjay Malhotra said, “As regards supply side inflation requiring a monetary policy response, it is pertinent to mention that monetary policy primarily acts by curtailing second round effects (wage expectations and firm level pricing behaviour) of a supply shock. It is difficult to distinguish between the second-round effects and the indirect impact of supply side pressures (in production cost through energy and other inputs) as both are present in core inflation. Similarly, there are risks of demand side pressures in view of the growth in monetary and credit aggregates.”
