The Reserve Bank of India has kept an inflation target of 4%, with a flexibility of 2% on either side.
RBI is in a tricky situation at the moment as it wants to increase key interest rates to curb the rising inflation but also faces a war-like situation globally, which is likely to slow down real economic growth, Times of India said in a report.
However, Arora said that policymakers may not react immediately through the interest rate channel. "We maintain our view that the RBI has some policy flexibility on hand, which will delay repo rate hikes. Policy repo rate hikes will be well telegraphed and shallow, and pushed to H2FY23, with the RBI in an active wait-and-watch mode," she said.