Eye on target: Fears of high inflation prompted RBI's off-cycle meeting

Growth forecast was cut to 7.2 per cent, from 7.8 per cent for FY23. Both forecasts were made assuming crude oil prices at $100/bbl

Near 7 per cent retail inflation in March and expectations of similar prints in April – and probably the entire April-June quarter – necessitated the off-cycle meeting of the monetary policy committee (MPC) members as they realised the urgency to act fast or face the grim prospect of failing to fulfil their mandate.

In a surprise move, the MPC increased the repo rate by 40 basis points (bps) to 4.4 per cent on Wednesday. The cash reserve ratio was hiked by the RBI by 50 bps to 4.5 per cent.

The main objective of the MPC is to target 4 per cent