22 AUG,2022 | MEDC
The minutes of the Monetary Policy Committee (MPC) deliberations for the August monetary policy review indicate more interest rate hikes in the coming months. The bond market's concern about elevated inflation are heightened by the fact that the government recently auctioned a new 10-year bond maturing in 2032 in the primary market, the coupon for which was set at 7.26%. Clearly, inflation expectations are running rife in the system. A certain shock therapy is required, as small steps over a prolonged period of time could allow inflation to get entrenched in the economy, and dislodging it then will be difficult. The RBI Governor has wisely said that the sequence of their policy measures is expected to strengthen monetary policy credibility, and also anchor inflation expectations. Inflation is the biggest enemy of the poor and policy that contains it needs the full support of everyone.