Do you see the RBI status continuing in February 2022 or will it change?

Even before we look at the future trajectory of RBI policy, let us not forget that Inflation is a serious problem in India and across the world. US consumer inflation for Nov-21 has come in at a 39-year high of 6.8%. Global supply chain worries are not going away in a hurry. Fed has already hinted at front-ending of the taper and the 15-Dec FOMC policy note is going to be one of the most critical in recent times. So, what is the road ahead for the RBI?

It is unlikely that the RBI will maintain a dovish policy for too long. After all, RBI is concerned that low bond yields forces people to take added risk. RBI would probably wait for some key cues like the CPI inflation for November and December in India as well as WPI data. RBI will also scan the fine print of the Fed statement on 15-December. If Fed front-ends rate hikes and taper, then the Feb-22 policy of the RBI could turn hawkish for the first time in 3 years.