RBI MPC Policy: Controlling inflation to be a key concern for central bank amid weak global cues

Controlling inflationary in its April monetary policy will likely to be a top agenda for the Reserve Bank of India (RBI), as weak global cues and high commodity prices raise their heads, several analysts have noted. The Monetary Policy Committee (MPC) meeting which begins today will conclude on Friday and will be followed by Governor Shaktikanta Das' monetary policy announcements. 

The Russia-Ukraine situation has materially altered the global inflation landscape, Churchil Bhatt, EVP & Debt Fund Manager, Kotak Mahindra Life Insurance said. “The RBI may opt to calibrate the quantum and pace of the inflation response to least disturb the post-Covid growth impulse.”   

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However, there is likely to be a renewed optimism regarding inflation on the back of the US announcing a massive release in the country’s strategic oil reserves and Russia offering crude oil to India at a big discount, Shivam Bajaj, Founder & CEO at Avener Capital pointed out. 

Bhatt added, that the MPC has deservingly earned its inflation credibility over the past few years and the same needs to be reinforced with a timely and proportionate response to recent inflationary challenges.  

Amid the inflation issue, Prashant Pimple, Managing Director & Chief Investment Officer – Debt, JM Financial AMC said, “The RBI would also most probably revise the GDP estimates lower on the current disruptions and raise the inflation forecast in the April 2022 monetary policy.”  

Besides, the market will closely monitor the April MPC for bond supportive measures such as Operation Twist/ OMO or extension of Held-to-maturity (HTM) dispensation beyond March 2023 and RBI is expected to continue to absorb liquidity via VRRR auctions, Pimple added.  

In the growth–inflation debate, most analysts believe that the RBI’s monetary policy committee (MPC) may maintain the status quo on the key interest rates and continue with an accommodative stance in the first monetary policy of this fiscal. 

The committee has begun its three-day deliberations on the benchmark interest rates today and is scheduled to release its decision on April 8, 2022. The RBI’s MPC had kept the repo rates at 4 per cent and the reverse repo rate at 3.35 per cent unchanged during its February 202 policy decision.