RBI policy meet begins today: Can an uptick in inflation, US Fed hike push RBI to hike rates?

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RBI) will begin its three-day meeting to decide on India's short-term monetary policy on Tuesday (August 8). RBI Governor Shaktikanta Das will announce the meeting outcome on Thursday (August 10). The recent sharp rise in vegetable and pulses prices and the July rate hike by the US Fed are the two major questions that the MPC will take into account before deciding on policy rates.

However, experts believe the RBI will maintain a status quo on rates and stance on August 10. According to a Mint survey of 10 economists, RBI MPC is likely to leave interest rates and policy stance unchanged at its meeting this week. All economists expect MPC to keep the repo rate unchanged at 6.5 per cent and retain the stance of withdrawal of accommodation.

While the majority expects RBI to maintain a prolonged pause after the August policy, the market is pencilling in a 50 per cent chance of 25 basis points (bps) hike over the next two RBI meetings. Read more: RBI rate, stance to stay on pause: Poll The RBI may want to wait for the next few months to observe the evolving trend of inflation before going for rate hikes. Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities believes the RBI will keep the benchmark repo rates unchanged yet again in the upcoming monetary policy meeting scheduled on 10 August despite the recent uptick in inflation and the US Fed rate hike in July-end.

"Inflation has witnessed an uptick from 4.31 per cent to 4.81 per cent. Monsoons have also led to a jump in food prices. Apart from this, the US Fed has also increased its interest rates to a 22-year high of 5.5 per cent.