Reserve Bank Likely To Keep Rates Unchanged on April 8, Say Analysts

Market experts have said that the RBI is concerned over the ongoing Russia-Ukraine conflict, which is damaging the international economy and India’s recovery prospects, not just boosting prices

According to economists, the RBI to raise its retail-inflation projection for the fiscal year starting on Friday by 50 to 80 basis points from the current 4.5 per cent. Image: Getty

New Delhi: The Reserve Bank of India (RBI) is more likely to keep rates unchanged as inflation is gaining momentum in India.

According to economists and analysts, the RBI’s global peers have already raised rates, potentially compelling the central bank to play catch-up aggressively later.

Market experts have said that the RBI is concerned over the ongoing Russia-Ukraine conflict, which is damaging the international economy and India’s recovery prospects, not just boosting prices, according to a report in the Reuters.

According to a Reuters poll in early February, nearly half of forecasters were expecting the RBI to raise rates at its April meeting, however, Russia’s invasion in Ukraine has upended those predictions.

Analysts are of the view that the central bank to stand pat on April 8, even though inflation has broken above the 6 per cent upper end of the bank's target band for two months.

Axis Bank’s Chief Economist Saugata Bhattacharya, who had earlier expected the RBI to raise its reverse-repurchase rate, said global uncertainties mean that "it makes sense to remain at a status quo."

RBI Governor Shakikanta Das, supporting such expectations, recently warned against a "premature demand compression through monetary policy".

According to the report, RBI’s Deputy Governor Michael Patra said India's growth was as weak as in 2013, when a US policy shift sent capital gushing out of emerging markets. “The recent reverberations of war have in fact, tilted the balance of risks downwards” for the economy, he said.

But economists warn inflation could spin out of control, hurting investors and savers alike, and most market participants said the RBI is already behind the curve on tackling inflation.

According to economists, the RBI to raise its retail-inflation projection for the fiscal year starting on Friday by 50 to 80 basis points from the current 4.5 per cent. Upward price pressure is expected to continue as the war and resulting economic sanctions on Moscow send prices soaring for the grain, energy, and other exports that Russia and Ukraine provide.

“In the aftermath of the Russia-Ukraine war, the probability that higher-than-expected inflation will persist has increased. The longer we wait to address that, the faster that we may have to play catch-up with it eventually," said Churchil Bhatt, executive vice president of debt investments at Kotak Life Insurance.