After the rate hike

Policy will depend on RBI's inflation projection

Market expectations from the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) have changed dramatically over the past few weeks. The rate-setting committee increased the policy repo rate by 40 basis points in an off-cycle meeting in May, which was a clear attempt to make up for the lost time. As several commentators have argued, the central bank is behind the curve in withdrawing monetary accommodation. The inflation rate based on the consumer price index (CPI) inched up to 7.78 per cent in April — nearly an eight-year high. Meanwhile, wholesale price index (WPI) inflation is in