RBI's approach to help set stage for a soft landing

The RBI's caution on inflation and its relatively hawkish position demonstrate its steadfast commitment to achieving the inflation target of 4%

With the government’s Budget being mostly as expected, the RBI, too, has stayed with the theme, with another, albeit smaller, rate hike. However, while this rate increase was expected, it was the hawkish tenor of Governor Shaktikanta Das that may have surprised the market. He reiterated that the RBI’s most urgent priority is taking inflation back to 4 per cent.

The caution around inflation risks is understandable. Through 2021 and 2022, the RBI had to face significantly higher inflation than its mandate, precipitating its most rapid monetary tightening since the new monetary framework was introduced in the early 2000s.

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