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RBI's repo rate hike: Two factors that took the market by surprise

Apart from the new stance on inflation and the attempt to pre-empt it, the other surprise was the unanimity in the decision, something rarely seen in the past

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Madan Sabnavis
The decision to raise the repo rate by 25 bps is surprising for two reasons. The first is that it is being done in expectation of inflation increasing in the coming months, though the targeted rate at 4.8-4.9% is still below the 6% upper band. This was not the stance taken earlier, even as inflation increased and expectations were in the upward direction. The second is that the decision was unanimous, which has rarely been the case in past policies where not more than 2 members spoke of rate hikes or assumed a hawkish tone.

The higher inflation expectations