Rate hold by MPC is justified by a confluence of risk

The current spike in vegetable prices is likely to be transient, but consumer inflation expectations have remained sticky at high levels

Analysts have formed a broad consensus that the Monetary Policy Committee (MPC) will hold the repo rate at 6 per cent at the December meeting. Despite some significant positive developments since the last meeting – a sharp climb in India’s Ease of Doing Business ranking, public sector bank recapitalisation and Moody’s sovereign ratings upgrade – there seem enough risks in the global and domestic economic environment to keep the repo rate on hold for now.
 
Juxtaposed against the MPC’s mandate to guide CPI-based inflation to the medium-term target of 4 per cent, we expect a gradual rise in the