Even as global central banks have started raising key policy rates and reversing their accommodative monetary policy stance, the Reserve Bank of India has continued with its growth supportive policy as retail inflation has not breached the target range.
The RBI though is mindful of the inflation risks and a re-assessment of its growth/inflation forecast and the stance itself is likely at the at the next meeting of the MPC scheduled between April 6 and April 8. As per recent data, domestic retail inflation rose to an eight month high of 6.07 per cent in February, higher than the tolerance level of medium-term inflation target of 4+/- 2 per cent for the second month in a row, but without breaching the set target.
The RBI’s latest survey of January 2022 shows that households’ inflation expectations have moderated by 170-190 basis points three months ahead and a year ahead, respectively. “… in February 2022, the RBI projected inflation to ease to around 4 per cent by the third quarter of 2022-23. Clearly, recent geopolitical developments pose an upside risk to these projections and the upcoming meeting of the MPC in April will provide a thorough re-assessment…,” RBI Deputy Governor Michael Patra has said.