Policy normalisation is back with RBI making surprise rate hike

The rate hike was expected in June, but clearly the central bank sees inflation path as being quite ominous to trigger such an action.

The Reserve Bank of India (RBI) has surprised the market with a repo rate hike of 40 basis points (bps), which is between 25-50 bps, and hence an odd number given that multiples of 25 have been the rule till the pandemic. It is a surprise because between the last policy and today there has been only one data point of high CPI inflation in March that is available. The Ukraine war, however, continues impacting prices of several commodities due to supply disruptions.

It does look like that finally the monetary policy committee (MPC) has turned its attention to inflation,