Key Points
The first monetary policy committee (MPC) meeting of 2024-25 starts on Wednesday at a time of slowing inflation and robust growth..
A rate hike could throttle growth, while making no difference to inflation due to factors out of control..
Note the smaller, non-square shape representing the economy in 2022-23, largely due to the twin challenges of unusually high inflation and a relatively high current account deficit..
There are similarities between then and now: coming after a period of a crisis (global financial crisis in 2008, covid-19 in 2020), steep rate cuts, sharp rupee depreciation, a post-crisis demand rebound, and eventual high inflation..
A recent RBI study observed that the correlation between bond and equity returns was particularly high and positive during periods of moderate inflation and strong growth..
