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 (RBI) gears up for its monetary policy committee (MPC) 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.
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