Economists Advise Reserve Bank of India to Maintain Current Repo Rate Amid Inflation Concerns
No need for a rate hike unless inflation spikes: Economists
The Economic Times
Image: The Economic Times
Economists meeting with the Reserve Bank of India (RBI) indicated no need for a repo rate hike unless inflation exceeds the central bank's tolerance band. Current inflation forecasts range from 3.5% to 5%, influenced by global events, particularly the ongoing conflict in West Asia.
- 01Economists see no immediate need for a repo rate hike from the RBI.
- 02Inflation forecasts range between 3.5% and 5% depending on oil prices.
- 03RBI's monetary policy committee will announce its decision on April 8.
- 04Brent crude prices surged by approximately 60-64% since February due to geopolitical tensions.
- 05Retail inflation was recorded at 2.75% in January.
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During a pre-policy meeting, economists advised the Reserve Bank of India (RBI) against raising the repo rate, citing that current inflation remains manageable within the central bank's tolerance band. They emphasized that the RBI has alternative measures to address currency pressures and will only consider a rate hike if inflation significantly rises. Current inflation forecasts from economists range from 3.5% to 5%, largely influenced by fluctuating oil prices due to the ongoing conflict in West Asia. Brent crude oil prices have seen a dramatic increase of 60-64% since February, trading between $110 and $120 per barrel. The RBI's monetary policy committee (MPC) is set to announce its first rate decision for the fiscal year 2026-27 on April 8. Economists noted that the duration of geopolitical tensions will heavily influence inflation and economic policies moving forward. As of January, retail inflation was recorded at 2.75%, while GDP growth for the second quarter of fiscal year 2026 reached 8.2%.
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The RBI's decision to maintain the repo rate could stabilize borrowing costs for consumers and businesses, helping to manage inflation expectations amid rising energy prices.
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