Cut the monetary policy committee some slack4 min read . Updated: 14 Aug 2017, 04:22 AM IST
By exercising caution in June and going for a 25 bps rate cut in August, RBI's monetary policy committee has allowed itself the margin to pare or hold repo rates in the near future
Much ink has been spilt in the past few months criticizing the interest rate-setting decisions of the Reserve Bank of India’s (RBI’s) monetary policy committee (MPC). The MPC was first criticized for leaving rates unchanged at its June meeting and then criticized again for lowering rates by only 25 basis points at its recently concluded August meeting (one basis point is one-hundredth of a percentage point). The complaints boil down to the claim that the MPC has consistently erred in overestimating inflation; therefore, it is argued, the monetary policy stance has been unduly hawkish, to the detriment of growth.