To achieve positive real rate, MPC needs to take repo rate closer to 6%

In our view, the MPC is likely to deliver a 50 bps increase in the repo rate (currently at 4.9 per cent), for both global and domestic reasons

A rate hike in the upcoming Monetary Policy Committee (MPC) meeting on August 3-5 is a broad-based view. The debate is on the size of a likely rate hike and the MPC’s tone amid latest developments since the June MPC meeting. Will the recent correction in global commodity prices and softer economic activity data in the western world lead to a smaller rate hike? Or will an inflation print 100 basis points (bps) higher than the upper bound of the mandated MPC’s band of 2-6 per cent keep it squarely focused on inflation?

In our view, the