According to experts, the Reserve Bank is likely to keep interest rates unchanged in its upcoming monetary policy review, but it may change its stance in light of retail inflation exceeding its upper tolerance limit, global uncertainties caused by the ongoing Russia-Ukraine conflict, and the need to protect and boost growth. The Monetary Policy Committee (MPC), which is chaired by the RBI Governor, will have its first meeting of the fiscal year 2022-23 from April 6 to 8.

On April 8, the outcome will be revealed. The MPC is projected to revise up its Consumer Price Index-based inflation forecast in April 2022, while growth projections for 2022-23 would be cut, according to Aditi Nayar, Chief Economist of ICRA Limited. “Nonetheless, the MPC is unlikely to compromise growth in order to keep import inflation under control. The MPC is expected to stay growth supportive for longer than other central banks because the top threshold of the medium-term inflation goal range is as high as 6%. In general, we anticipate a policy of status quo in April 2022 “she stated

Given the current state of affairs, Suman Chowdhury, Chief Analytical Officer at Acuite Ratings & Research, believes the RBI “has little capacity to tighten monetary policy.”

In light of the war’s negative implications, the RBI will need to be cautious in its monetary policy actions, seeking to keep inflation within the tolerance zone while maintaining nascent growth impulses, he said.
“During the June-August 2022 policy review, we expect the RBI will restore the width of the LAF corridor to pre-pandemic levels by raising the reverse repo rate by 40 basis points, followed by a cumulative 50 basis point hike in the repo rate for the balance of 2022-23,” Chowdhury said.