RBI's monetary policy panel must wait for the substance of the US tariffblitz to settle

Copyright © HT Digital Streams Limit all rights reserved. Opinie Livemint 3 min Read 08 Apr 2025, 07:30 am IT The Outlook has become haze on both the most important variables it monitors, not just one. (Reuters) Summary For the time being, the Indian Central Bank’s course setup committee should only give the readiness to act when justified. In the midst of rapid economic risks, it is best to wait for clarity on the impact of US rates before acting any rate. It has been only a few days since the 47th US president Donald Trump loosened an economic tsunami by declaring what he calls “friendly reciprocal rates” that are anything but “friendly” for the rest of the world. Large or small, friend or foe, no country has been spared. While China immediately announced a 34% retaliation tariff and stock markets crashed indices in response, the central banks of most most important targets still hold after the fast unfolding situation. The Indian stock market, which looked less brilliant last week than others, took a hard tumble on Monday, just like the Monetary Policy Committee of the Reserve Bank of India (RBI) (MPC) started with a three -day policy review. Also read: Vivek Kaul: ‘Stupid, stupid, stupid’ is the only way to describe our rates in such a scenario, how should the panel respond? Should the MPC opt for a deep rate reduction in defense of GDP growth? Or should it follow the example of central banks elsewhere – such as the US Federal Reserve, Bank of England and People’s Bank of China – who have chosen not yet to act? Unlike many other countries, India is still hopeful to negotiate a bilateral agreement with the US that could save us from the worst effects of the 26% tariff imposed on US -bound exports. How soon it will work out, if so, remains unknown. What is known, however, is that the world order taken apart by Trump’s ‘America First’ policy will adversely affect both growth and inflation around the world. Growth will almost fall. The International Monetary Fund has warned against a ‘significant risk’ for the global economy. Providing the supply chain is also likely to raise prices and place stagflation on the cards. And if the US slides in a recession defined as two consecutive quarters of the GDP underdrawal-will other economies then have an effect. Although India’s economy is only lightly integrated with the world, it is difficult to predict what it all means for our output expansion and cost of living. Also read: Despite tariff heat, relieving the policy to stay on track, what will make RBI -Governor Sanjay Malhotra, chairman of his second policy meeting, of this uncertain scenario? And what will be the view of Poonam Gupta, who was recently appointed as Deputy Governor in charge of monetary policy? ‘Trial at Fire,’ is how former governor D. subbarao described his early days at the RBI’s helm in the wake of the financial crisis in 2008. The situation of today is no less challenging. The answer is not to respond in a hurry. Here, central banks have an advantage over elected governments that are subject to populist traits and pressure. Monetary authorities can afford to investigate claims that do not serve the country’s long -term interests. As RBI struggles with the exchange between growth and price stability, it may be tempted to fit another one-point in February with another one. Since RBI has been ahead of Growth support before Trump’s rates, a follow-up cut can look like a ready-made agreement. The minutes of the last MPC meeting seemed to have been suggested as much. Since then, our growth prospects may have reduced more than the chance to keep inflation at 4%. Also read: MPC Review: Course Neglement Not yet ideal. Relying on surplus liquidity and operation-turning instead, even if a crackle arises for a deeper than usual, the panel should wait. Not indefinitely, but long enough to drop the fabric a little. The prospects have the most important variables it monitored, not just one. In this context, along with the promise of quick action once the situation guarantees, the best option of RBI may be. For critics, and there will surely be a lot, MalhoTra can always respond by calling John Maynard Keynes. “If the facts change, I change. What are you doing, sir? ” Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #rbi #mpc #tariff Hike Mint Specials