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Unwavering caution — on RBI holding repo rate
Context
The RBI’s decision to hold rates reflects its expectations of faster inflation
Price stability: Main criteria
For the Reserve Bank of India there is just one economic indicator that dominates its policymaking calculus: price stability
What has happened?
The Monetary Policy Committee (MPC) has opted yet again to keep interest rates unchanged
Rationale
- Price gains as measured by the Consumer Price Index had accelerated to a seven-month high in October and the RBI’s survey of household expectations for inflation over both the three-month and one-year horizons showed a “firming up”
- Price gains excluding the volatile food and fuel categories are particularly at risk from “the staggered impact of HRA increases by various State governments” that could push up housing inflation in 2018
