Before the pause

Overall conditions call for another rate hike

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI), which started its last meeting for the fiscal year on Monday, has a relatively difficult decision to make. Since the inflation rate was above the upper end of the tolerance band for over three quarters, which legally meant that the central bank failed to attain the target and had to write to the government as mandated by the law, there was clarity in terms of decision-making. The rate-setting committee had no option but to increase the policy interest rate, which had been earlier reduced to tackle pandemic-related disruption.