RBI likely to maintain status quo on rates with an eye on the dollar, oil prices
Reserve Bank of India's (RBI) rate-setting panel is likely to keep the policy interest rates unchanged later this week while continuing its protracted vigil on inflation, as the steepest increase in crude oil prices in 10 months amid signs of further rate hardening in the US lengthens the odds on an immediate turnabout in the rate trajectory at home.
An ET poll of 12 market respondents showed that at the end of its October 4-6 meeting, the Monetary Policy Committee (MPC) is likely to keep the repo rate unchanged at 6.50% while retaining its stance of withdrawal of accommodation. Such an outcome would mark the fourth successive policy review in which the MPC has maintained a status quo on rates and stance.
Focus on protecting external sector
«The MPC is expected to extend its hawkish pause… global crude oil prices have surged to November 2022 highs, surpassing the RBI's April estimate of $85 per barrel, with September's average approximately 9% higher than that of August,» Radhika Rao, senior economist, DBS Bank said.
This has coincided with the dollar's climb as the Federal Reserve has sought to hold rates 'higher for longer', dimming the appeal of emerging market assets for global investors.
Overseas funds turned net sellers in Indian equities for the first time this fiscal year in September even though the Nifty breached the 20,000 mark for the first time.
«At the same time, the US dollar has appreciated sharply due to favourable interest rate and growth differentials, keeping the INR on a weakening path,» Rao said.
Higher oil prices pose upside risks to India's inflation and current account deficit while a depreciating rupee increases the threat of imported inflation. Such situations make a stronger case for the
