As high prices restrain consumption, inflation control must be top priority

Context:

The Reserve Bank of India’s rate decision to raise interest rates by 50 basis points, as a bout of extreme volatility in international financial markets combines with persistently high domestic retail inflation to threaten macroeconomic stability, globally and in India.

Reason behind the move

• Economic problems: The COVID pandemic and Russia-Ukraine war were the two factors responsible for monetary policy operations by RBI to come out of Inflation.
• Increasing price pressure: The RBI’s latest surveys of households’ inflation expectations and consumer confidence are signalling that price pressures will continue to restrain consumption.