Fighting FOMO

India’s central bank has shown exemplary confidence in its analysis of the economy by not bowing to the rate-cut trend

-  Pushpita Dey

Almost the whole of the global economy is in flux. Wars are being fought in Europe and West Asia, millions are being displaced in Sudan, Bangladesh ousted an elected leader months ago and the United States has re-elected a leader whose policy priorities are clearly uncertain. Amid these tensions and rising inflation risks, one entity is standing certain—the Reserve Bank of India (RBI).

The framers of monetary policy for the fifth-largest economy in the world are taking a stand by not running with the trend among central banks to cut repo rates at a moment of global economic instability. The European Central Bank (ECB) slashed rates in June, as did the Central Bank of Canada. The US Federal Reserve (Fed) slashed rates by 50 basis points in September (and then again by 25 basis points in November).

Historically, the RBI has followed the Fed, slashing and raising rates in tandem with the American central bank. Not this time. In September, when the Fed slashed rates, everyone expected the RBI to follow suit. It did not. Governor Shaktikanta Das has stood firm. He said there are significant inflation risks and the central bank wants inflation to settle at around 4% before easing rates.

True to Target