New Delhi, Oct. 8 -- In the run-up to the policy review, there was widespread expectation that the interest rate hike cycle would be set in motion. Inflation is inching up and will move up further. Globally, central banks are hiking interest rates, and bond yields are at multi-decade highs.

The Reserve Bank of India (RBI) did the expected. The monetary policy committee (MPC) hiked the repo rate by 25 basis points (0.25%) from 5.25 to 5.50%. The repo rate is the rate at which RBI lends funds to banks, if and when required. This rate is the pivot for interest rates across the system. By raising the repo rate, the central bank signalled that bank deposit and lending rates should rise.

Apart from the rate hike, there is a stance on future m...