Growth-focussed MPC will need to tighten before long

Since the outbreak of the war in Ukraine, MPC members have emphasised the need for monetary policy to mitigate the downside risks to economic growth. It therefore seems likely that interest rates will be kept on hold at the committee’s upcoming meeting, which concludes on Friday 8^th April. But with inflation likely to become more of a concern, the RBI will need to start a tightening cycle before long, and we think that the repo rate will rise by more this year than the consensus is expecting.