Punjab, Sept. 10 -- The Reserve Bank of India has left the repo rate at 5.25% for a fourth consecutive meeting and kept a neutral stance. Governor Sanjay Malhotra has described the current inflation pressure as largely supply-side and called it premature to discuss tightening.
He is right. He is also running out of room to stay right.
Why holding is the correct call
Interest rates are a demand tool. Raising them makes borrowing dearer, cools spending, and brings prices down by reducing how much people buy.
None of that works on the current problem. Prices are climbing because crude is near $100 a barrel and the rupee has slipped past 95 to the dollar. A rate rise does not produce cheaper oil. It slows an economy that is otherwise doing ...