Shifting expectations | Editorial Comment

Shifting expectationsThe six-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) decided to leave the policy repo rate unchanged at its meeting earlier this month, which was a prudent decision. Although the inflation rate exceeded the target in June, it remained below target for 16 consecutive months. Furthermore, it made sense to wait for more clarity on both the international and domestic fronts. The situation in West Asia does not seem to be improving significantly, making prices of crude oil excessively volatile, which requires continued monitoring. By the next meeting, there will also be more clarity on the possible impact of a deficient monsoon on agricultural output. However, as this newspaper argued then, the RBI’s inflation projections suggested that the policy rate would not remain at the present level for too long. The minutes of the meeting, released on Wednesday, are being interpreted along similar lines.