Reserve Bank’s inflation battle is far from over
A 25 bps rise in repo rate is less risky for RBI to balance trade-off between growth and inflation
The Reserve Bank of India (RBI) has now raised the repo rate for the second time on a trot by 25 basis points (bps). We had seen this coming —given the volatile and uncertain atmosphere—both on the domestic and the global front. From that point of view, it was probably preferable for RBI to hike the repo rate now than wait for later as the risks of a 50bps increase could have emerged if something were to go wrong—such as a sharp increase in the oil prices or even a sharper-than-expected depreciation of the Indian rupee on the back of trade war tensions.