RBI Monetary Policy: One last rate hike now but signaling close to the peak

Inflation remains sticky and most G-10 central banks may in any case, continue with rate hikes; given India's resilient growth momentum, the MPC might increase the repo rate one final time

The balance of probability is that the Monetary Policy Committee (MPC) will:

(i) hike the repo rate by 25 basis points (bps) to 6.5 per cent and

(ii) signal a pause while it assesses the impact of the rate hikes across various channels on the growth – inflation balance.

There is likely to be some dissent among MPC members on the rate actions and the stance. More than the rate action, forward guidance communication will be most watched in the policy.

Why a 25 bps rise, not a pause? The following are some reasons, based both on macro-fiscal fundamentals and