Economists anticipate that the Reserve Bank of India (RBI) is unlikely to alter its repo rate or stance during the upcoming monetary policy committee (MPC) meeting, citing ongoing geopolitical tensions. The focus is expected to be on a cautious approach, with keen interest on the RBI’s projections for GDP and inflation given the current uncertainties.
Madan Sabnavis, Chief Economist at Bank of Baroda (BoB), mentioned that no immediate measures for liquidity or currency management are foreseen, with the RBI expected to act when necessary. The policy meeting, spanning from April 6 to April 8, will be the first since the recent surge in Brent crude prices due to the West Asia conflict.
Should inflation breach the upper limit of 6 percent, analysts suggest a potential rate hike towards the year-end. BoB highlighted that the impact of the conflict on economic growth and inflation will likely be clearer in the coming months, influencing the RBI’s future rate decisions.
HSBC Global Investment Research emphasized that the MPC meeting will primarily focus on communication strategies to address concerns arising from the oil price surge. Despite the shock, HSBC economists do not foresee immediate rate hikes, as the RBI is expected to prioritize longer-term inflation projections.
Experts opine that the era of rate cuts may have concluded, signaling a prolonged pause in RBI’s monetary policy. While recent measures were taken to tighten banks’ foreign exchange positions, discussions around potential interest rate adjustments remain speculative, with HSBC indicating a low likelihood of immediate rate hikes.
