New Delhi, Oct. 8 -- In the run-up to the Reserve Bank of India's (RBI) monetary policy review, there was widespread expectation that the interest rate hike cycle would begin. Inflation is inching up and is likely to move up further. Globally, central banks are raising interest rates and bond yields are at multi-decade highs.

The RBI did the expected. The Monetary Policy Committee (MPC) hiked repo rate by 25 basis points (0.25%) to 5.50%. The repo rate is the rate at which the RBI lends money to banks. This rate is the pivot for interest rates across the system. By raising the repo rate, the RBI has signalled that bank deposit and lending rates should move up.

Apart from the rate decision, the RBI also signals its stance on the future c...