CLSA sees repo rate peaking off at 7.5%

Rajeev Malik, Senior Economist at CLSA, in an interview with CNBC-TV18's Mitali Mukherjee and Udayan Mukherjee, gave his perspective and views on the much awaited RBI's policy announcement.

Below is the transcript of the interview. Also watch the accompanying videos. Q: Is there any chance of 50 bps? Or will they tried and tested 25bps with the fact that the monsoon outcome is still uncertain?
A: For the last two-three meetings, the most likely outcome would be a quarter percentage point hike, although a 50 bps cannot totally be ruled out. The whole risk reward ratio favours still sticking with a quarter percentage point move. People who are gunning for 50 bps move are doing so mainly on two counts.
One is about the whole credibility issue. I am not sure what that actually means. RBI is a central bank that in the last four-five years has missed its inflation forecast. Part of the reason is that it does not know what needs to be done because it is trying to focus on WPI inflation, which no one knows what the pass-through in terms of administered prices or the monsoon outcome will be. Its trying to target any indicator that it itself cannot forecast.
The second reason why 25 is a right way to go is we have seen a pretty aggressive pace of tightening come through. Inflation has surprised on the upside, but it is not the time to lose patience. Monetary measures do work with the lag. We haven