Break with convention

There are limits to what monetary policy can achieve

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday surprised many market participants by reducing the policy repo rate by 35 basis points, making it the fourth reduction in a row. The central bank also lowered its growth forecast for the current year to 6.9 per cent from 7 per cent. The MPC doesn’t expect inflation based on the consumer price index to cross 4 per cent at least until the first quarter of the next financial year. 

The central bank’s idea of breaking with the convention of adjusting rates by 25 basis points, or