RBI should pause, think about decoupling from Fed: Soumya Kanti Ghosh

The RBI should “pause and think” if it can continue mirroring the US Federal Reserve “stroke by stroke” in terms of rate hikes or decouple from the American central bank, SBI group chief economic adviser Soumya Kanti Ghosh said. Ghosh said he does not see an end to the rate hike cycle of the Fed in the short-term, which makes a case for the RBI to contemplate about decoupling.

“My point is can we match the Fed stroke by stroke? At some point of time we need to pause and think whether the impact of the earlier rate hikes (by the RBI) has percolated down into the system… I don’t see any end to the Fed’s cycle soon, it could be three or more rate hikes going ahead,” Ghosh said.

In January 2023, the country’s inflation jumped up to 6.52 per cent, above the RBI’s tolerance level of 6 percent.

This came after inflation remaining above 6 per cent for 10 out of twelve months in 2022. Most economists believe that the RBI will hike rates to soften inflation, which in recent times has been spurred by food prices.