Perspective on pre-RBI MPC meet in August 2022 by Mohit Ralhan,


“The August meeting of MPC is one of the most crucial ones as the Indian economy is at a critical juncture. June marked the sixth straight month when inflation at 7.01% came higher than the upper tolerance level of RBI. RBI also needs to look at the policy rate increases in the USA, as it would want to keep the spread under control. The US Fed has already increased the policy rates by 2.25% and a further hike by 1% is expected in 2022. At home, RBI has till now increased interest rates by 0.9%. The inflation in agri-commodities around the globe is showing no signs of abetment, while the Russia-Ukraine war still continues. The continuation of supply chain issues amidst the zero covid policy of China and labor shortages in major economies have made the fight against inflation quite challenging. Therefore, a significant rate hike is likely, which may or may not happen in one shot and RBI may like to spread it over this year. A 0.35% to 0.5% hike in the next meeting looks likely followed by another similar hike later in this year if inflation continues to rage above 7%.”