RBI's surprise rate hike signals pivot to inflation management completed

The MPC has focused on preventing inflationary expectations from un-anchoring in an increasingly uncertain environment.

In an unexpected move, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) unanimously delivered an off-cycle hike in the repo rate of 40 bps and the cash reserve ratio (CRR) of 50 bps in May 2022, a month before the next scheduled policy review.

The MPC also decided unanimously to remain accommodative, while focusing on the withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth. Contrary to the market’s expectations of a change in the stance from accommodative to neutral in June 2022, the RBI Governor has clarified that