The RBI surprised the markets with an unscheduled policy meeting today as it announced a repo rate hike of 40 bps to 4.4% in the backdrop of rising inflationary pressures. Today’s policy statement was hawkish, indicating the RBI’s focus on containing upside risks to inflation and the second-round impact of supply-side shocks on the economy to keep inflation expectations anchored. It also announced an increase in CRR of 50 bps to withdraw the surplus liquidity which stood over Rs 7 lakh crore in April. However, the RBI decided to keep the policy stance unchanged as accommodative while focusing on withdrawal of accommodation even as it started on a rate hike path. Going ahead, we expect the RBI to hike the policy rate in the June meeting by 25-40bps.
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