Rate hikes must be aligned with economic recovery: Ashima Goyal
Noting that the Indian inflation trajectory differs from that of the United States (US), Reserve Bank of India (RBI) monetary policy committee (MPC) member Ashima Goyal stated that the central bank is not behind the curve in hiking interest rates to tackle rising inflation. According to her, rate hikes must be aligned with the economic recovery. To maintain a balance between growth and inflation, Goyal stressed that real interest rates should not be deviated too far from equilibrium levels and undue volatility in rates must be avoided. The long-term price pressures materialised in India only after the Russia-Ukraine war started on 24 February 2022. Inflation forecasts, to which the MPC responds, were very much within the tolerance band before that, Goyal said, adding that it is never wise to overreact to shocks when the economic recovery is shaky post the coronavirus pandemic while responding to a question on why RBI did not raise interest rate much earlier despite rising inflation.