The MPC's decision was the first scene of a tariff-driven drama

High global uncertainty means the monetary policy panel's rate cut and shift to a dovish stance are not the end of the story

- Mythili Bhushanmath

"A week is a long time in politics," quipped former UK prime minister Harold Wilson during the 1964 sterling crisis that led to the devaluation of the pound and eventually saw it replaced by the dollar as the international reserve currency. Fast forward to April 2025. To the turmoil in global markets in the week since 2 April 2025, when US President Donald Trump announced his reciprocal tariffs, and a week seems more like an eternity. Not only in politics, but in economics, finance, trade...you name it.

On Monday, as markets tumbled across the world, including in India, fear stalked the streets. Tuesday's recovery did little to assuage fears that Trump's "sweeping and swingeing" tariffs and the retaliation—or threats thereof—from trading partners would upend the existing world economic order, signaling that this is not the end of the story.

It is against this background of near-complete panic that the Reserve Bank of India's (RBI) rate-setting Monetary Policy Committee (MPC) met for three days, starting 7 April 2025, to take a call. Remember, the MPC in its present avatar is yet to complete a year. Its three external members were appointed in October 2024, the governor in December 2024, and deputy governor-in-charge of monetary policy less than a week ago.