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Below is the view on RBI's off cycle meeting by Mr Karan Desai, Founder- Interface Ventures

The MPC today was all about giving the central government comfort and visibility on the RBI’s efforts to reign in inflation and bring it back closer to the target 4% mark; it has consistently breached the upper tolerance threshold of 6% for the last 3 quarters running.

Driven by the war in Ukraine, with surging inflation on account of supply disruptions of various commodities including food and fuel, the RBI has already hiked the repo rate 4 times this financial year to now rest at 5.9% in order to bring down inflation from its current 7% plus levels.

While some feel that monetary tightening could have started a little earlier, the RBI took a fairly balanced approach to ensure that growth did not slow down as India was still emerging from the COVID induced lockdowns and business disruptions.

The US Fed hiked rates by 75 bps just yesterday to a range of 3.75% to 4% which is at its highest level since 2008. However, it also indicated a tapering off of subsequent hikes in order to bring inflation back to around the 2% target.

This could be indicative of a similar position taken by the central bank in India to continue raising the repo rate in lower increments going forward to keep a check on inflation until global macros reach some level of stability.
 

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