The Ukraine-Russia conflict has led to deterioration in the global economic outlook and further complicated the policy trade-offs for central banks across the globe. India’s economic recovery also faces headwinds from the weaker global economic environment, higher commodity prices, and the recent rise in COVID cases. The RBI has embarked on the policy normalization in the April meeting and revised its forward guidance to prioritize controlling inflation over economic growth revival. Its plan to withdraw liquidity in a gradual manner will face a huge challenge from rising and broadening inflationary pressures. We now expect RBI to front-load rate hikes starting in the June meeting.
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