Macro economy gives confusing signals to MPC on policy rate front

Economists divided on MPC outcome; say it will be a tough decision to make

The Monetary Policy Committee (MPC) will gauge weakening macroeconomic parameters like surging inflation, subdued industrial growth, and widening trade deficit to take a call on the policy rate in its three-day meeting commencing July 30.

Economists say it will be a tough decision to make. Some say the MPC will raise the rate, while others are of the view that there is already de facto interest rate tightening through rising bond yields, which might prompt the central bank to go for a pause.

If one looks at the data — growth in the Index of Industrial Production (IIP) slowed down to a