Three surprises and one lesson

The biggest surprise is perhaps the tone of the policy—the way it has blamed the government for doing nothing to fight the persistently high inflation. The rate hike, going by the RBI statement, is to “maintain the credibility of the commitment of monetary policy to controlling inflation”. But more important than that, its objective is to “reinforce the point that in the absence of complementary policy responses on both demand and supply sides, stronger monetary policy actions are required”.

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