NEW DELHI: Former RBI Governor D Subbarao said on Wednesday that criticising the Reserve Bank of India for being behind the curve in raising interest rates to combat increasing inflation is unjust, adding that it is difficult for any central bank to predict the future more correctly.

In an off-cycle policy meeting earlier this month, the central bank's rate-setting panel, the Monetary Policy Committee (MPC), stunned the markets by raising the repo rate by 40 basis points. It was also the first rate hike since August 2018, when inflation was spiralling out of control.

Given the lag in monetary policy, Subbarao added that this rate hike by itself is unlikely to drive inflation down quickly. In a press briefing, he said, "I saw that the hasty attempt to tighten monetary conditions through an off-cycle MPC meeting generated various problems."

Subbarao was responding to a question on why, despite growing inflation, the RBI did not hike interest rates sooner.  "Did the RBI fall asleep at the wheel as inflation soared? Is it going too far in favouring growth above inflation? Willn't delaying action have a significant macroeconomic cost? Will the RBI's credibility be harmed by this scrambling? "This criticism, I believe, is unjust," he said.

In April of this year, retail inflation soared to an eight-year high of 7.79 percent, marking the seventh consecutive month of rapid growth. The government has directed the RBI to maintain a 4 percent inflation target with a 2 percent margin on each side.

Subbarao added that in early April, when the previous scheduled MPC meeting took place, the war in Ukraine had been going on for weeks, but even seasoned military analysts and experienced diplomats were wrong in forecasting its direction, as were other central banks across the world.

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