India’s Monetary Policy Committee is likely to deliver an expected rate hike of 25 basis points (bps) in April, even as global markets cut rates for a US rate hike next week following the banking crisis, economists said on Tuesday.
India’s headline and core inflation was flat, with data markets closing on Monday, with annual retail inflation above the Reserve Bank of India’s (RBI) upper limit, down slightly from January’s 6.52%.
“We expect the focus to come down on inflation, both globally and in India,” Gaura Sen Gupta, chief economist at IDFC First Bank, said on Tuesday.
“Policymakers may use other tools to hedge financial institutions and raise rates to curb inflation.”
Investors tried to keep rates low on Monday and the Federal Reserve refused to raise rates, believing the biggest US bank failure since the 2008 financial crisis would make policymakers think twice.
“We expect the RBI to hike policy rates by 25 bps in April. The January and February publications (RBI) will raise concerns about core inflation showing stability,” Sen Gupta said.
Economists said February’s inflation print significantly increased the likelihood that the central bank would miss its inflation forecast of 5.7% for the quarter ending in March 2023.
“Overall, the worst period of high inflation is behind us. We expect March inflation to be around 6% and to recede to 5% in the coming months,” analysts at Motilal Oswal wrote in a note adding 25 bps. April was “given”.
Investors and economists will closely monitor the US consumer price index release on Tuesday and the Fed’s policy outcome on March 22.
Both will be important inputs for the April 3-6 RBI Monetary Policy Committee meeting.
“The RBI remains undecided on the future rate path as persistent global conditions call for frequent macro reassessments,” Emkay Global economists Madhavi Arora and Harshal Patel wrote.
(Except for the headline, this story was not edited by NDTV staff and was published on a syndicated channel.)
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