Macroeconomic adjustment

Risks for growth and asset prices have increased

After an off-cycle meeting in May, leading to an increase in the policy repo rate by 40 basis points, the outcome of the Monetary Policy Committee’s (MPC’s) June meeting on Wednesday did not surprise financial markets. The rate-setting committee of the Reserve Bank of India (RBI) unanimously decided to increase the policy repo rate by 50 basis points to 4.9 per cent. The standing deposit facility rate and the marginal standing facility rate were adjusted accordingly. Financial markets were relieved that the policy rate hike was not accompanied by another increase in the cash reserve ratio. But this relief is