The increase in the repo rate was further based on factors such as rising inflation expectations, increasing nominal unit labour costs and high growth in money supply and bank credit extension. The Monetary Policy Committee concluded at its meeting in November 2002 that the level of interest rates was appropriate to avert an inflation spiral.
Although it was still unclear at that time whether inflation had peaked, the repo rate was kept unchanged because a number of developments indicated that inflationary pressures could begin to abate.