Highlights

  • RBI Monetary Policy Committee to meet on June 6 to 8
  • A 50 bps rate hike expexted

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RBI June Monetary Policy: Factors at play for Shaktikanta Das

The Reserve Bank of India increased the policy repo rate by 40 basis points to 4.40 percent in an off-cycle meet in May.

From singing the growth melody to crying inflation worries, the mint street has been seen shifting its focus from Covid to geopolitical tensions that have led to a sharp increase in commodity prices, ultimately hitting the common man.

With the changing tone of the RBI, we look at the factors at play that governor Shaktikanta Das has to deal with.

Inflation in April hit the highest since May 2014 at 7.8% and the central bank is not expected to relax till October. This means an inflation level above RBI's 6% target band for 9 straight months.

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But it seems like the global factors have started playing around with the central bank a lot, lately.

Eurozone inflation has hit its highest level since the creation of the euro in 1999. Prices have been rising for 10 consecutive months. Energy costs shot up by a record 39.2%.
Germany, Europe’s biggest economy, has been among the hardest hit. Even the United States’ annual inflation rate remained close to a 40-year high.

So, as the tightening of monetary policy begins with an off-cycle meeting in May; can we expect the rates to get back to their pre-covid levels of 5.15%? That is something the street will see in the upcoming policies even as the governor said the expectations of a repo rate hike by the central bank is a ‘no brainer'.

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