Inflation and growth

Demand slowdown can increase policy complexity

The consumer price index-based inflation rate surged to a 14-month high of 6.2 per cent in October. The increase has prompted several economists to revise their policy rate-cut expectations. Some economists were expecting the Reserve Bank of India's (RBI's) monetary policy committee (MPC) to reduce the policy rate in the upcoming December meeting. However, this increase would not have come as a surprise to those following the RBI's position. In his latest policy statement, RBI Governor Shaktikanta Das noted that moderation in headline inflation is expected to reverse in September and likely to remain elevated in the near term due to adverse base effects, among other factors. At a Business Standard event last week, Mr Das emphasised the inflation rate in October could be higher than that in September. The actual number, thus, has been largely on expected lines.