Shortly after Reserve Bank of India (RBI) raised the repo rate by another 50 basis points (bps) on Wednesday, thus taking the total repo rate hike to 90 bps in the past one month, Kotak Mahindra Bank's chief Uday Kotak said banks the world over are following suit.
In a tweet, he said that liquidity needs to be tracked over the next nine months as the US embarks on quantitative tightening.
Meanwhile, Mr Kotak also hinted at food prices and the Russia-Ukraine war in his tweet.
Monetary policy: RBI moves at speed. 50 bps now, total 90 in a month. Similar steps by global central banks to catch up.Australia did 50. US Fed 50 more likely next week.Let's watch liquidity over next 9 months as US embarks on QT(quantitative tightening). And food, fuel, war!— Uday Kotak (@udaykotak) June 8, 2022
Rising food prices and the ongoing war between Russia and Ukraine have led to a global spike in inflation.
In fact RBI Governor Shaktikanta Das said in his customary speech after the Monetary Policy Committee (MPC) meeting that “the war in Ukraine has led to globalisation of inflation”.
Rising inflation has led the RBI to raise key lending rates twice in a span of over a month, through which it aims to squeeze liquidity and check price rise.
“MPC has noted that inflation has remained above the tolerance band,” Mr Das said in his speech, adding that further monetary policy measures are required.
The RBI Governor said further that inflation is expected to be at 6.7 per cent level during the current fiscal, as upside risk to inflation persists due to a recent spike in tomato and crude prices.