Beyond rate cuts

RBI's focus now is on improving transmission and lending

The decision of the monetary policy committee (MPC) of the Reserve Bank of India (RBI) to leave the policy rates unchanged is in line with market expectations. The evolving inflation dynamics played a key influencing role. Inflation based on the consumer price index jumped sharply to 7.4 per cent in December. While the vegetable prices, especially those of onions, have come down from their December highs, the decline in the inflation rate could be restricted in the near term by higher prices of pulses and other protein items. The adjustment in telecom prices is also putting cost-push pressure on core