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RBI MPC Meeting: Economists Predict Rate Pause Amid Oil Price Shock

Economists anticipate the Reserve Bank of India's Monetary Policy Committee will maintain the current repo rate and its policy stance at its upcoming meeting. The focus will be on the central bank's communication regarding the economic impact of the geopolitical conflict and the recent oil price shock. While inflation remains a concern, analysts from Bank of Baroda and HSBC suggest the RBI is likely to stay on a prolonged pause, prioritizing one-year ahead inflation outlook. A rate hike is only considered a possibility later in the year if inflation consistently breaches the upper tolerance band.

Key Points: RBI MPC Meeting: No Repo Rate Change Expected Next Week

  • Repo rate expected on hold
  • MPC stance likely unchanged
  • Focus on RBI's GDP and inflation forecast
  • Oil price shock adds uncertainty
  • Rate hike possible if inflation breaches 6%
2 min read

Economists don't see any change in repo rate or stance at RBI MPC next week

Economists forecast RBI MPC will hold repo rate and stance amid geopolitical tensions and oil price volatility. Key focus on GDP and inflation forecasts.

"We do not expect any measures for either liquidity or currency management as RBI will do whenever required as we have seen of late. - Madan Sabnavis"

New Delhi, April 3

Economists on Friday said they do not expect any change in repo rate or stance this time amid geopolitical tensions, as the Reserve Bank of India gears up for its monetary policy committee meeting next week.

According to them, the tone will be cautious and what will be eagerly awaited is RBI's forecast of GDP and inflation under the prevailing uncertainty.

"We do not expect any measures for either liquidity or currency management as RBI will do whenever required as we have seen of late," said Madan Sabnavis, Chief Economist, Bank of Baroda (BoB).

The three-day policy meeting is scheduled from April 6 to April 8 -- the first since the ongoing energy shock triggered by the West Asia conflict pushed Brent crude to average around $100 per barrel in March.

If inflation breaches the upper tolerance band of 6 per cent, the bank said there could be a rate hike towards the end of the year.

"Impact of war on growth and inflation will become clearer in the next 3-4 months. RBI is likely to then take a call on the direction of its rate trajectory," according to BoB.

According to HSBC Global Investment Research, the MPC meeting will be all about communication to address the anxiety around the oil price shock.

"We expect the RBI to outline scenarios, sensitivities, and broad tenets of their reaction function. Despite the oil price shock we don't expect rate hikes over the foreseeable future as we believe the RBI will focus on one-year ahead inflation, which may look softer than inflation in the immediate months," said HSBC economists.

According to experts, the economic landscape has reached the end of the rate cut cycle and RBI will now remain on a prolonged pause.

The RBI moved on March 27 to sharply tighten onshore banks' net open foreign exchange positions, prompting speculation over whether an interest rate defence of the rupee would follow. HSBC pushed back on that view, saying the bar for rate hikes remains high.

- IANS

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Reader Comments

R
Rohit P
Good. At least some stability for now. My home loan EMI has been a constant worry with all the global uncertainty. Hoping the pause continues so we can plan our finances better. 🤞
M
Michael C
The communication strategy is key here. The RBI needs to clearly outline its scenarios for different oil price levels. Transparency will reduce market anxiety more than any immediate action.
A
Aditya G
While a pause seems prudent, I respectfully disagree with the view that rate hikes are off the table. If inflation crosses 6% and stays, protecting the common man's purchasing power must be the priority, even if it slows growth a bit. The RBI should be ready to act.
S
Shreya B
The real issue is petrol and diesel prices. If crude stays at $100, everything from vegetables to transport gets costlier. RBI can only do so much. The government needs to look at taxes on fuel to provide some relief to the aam aadmi.
K
Karthik V
Waiting for 3-4 months to assess the war's impact makes sense. It's a fluid situation. Better to gather more data than make a hasty move now. Hoping for a stable rupee as well! 🇮🇳

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