India

RBI Watch

RBI Watch

MPC to hold rates in face of Omicron uncertainty

Whereas many EM central banks have been hiking rates aggressively, the RBI has been taking only baby steps towards policy tightening over the past couple of months. And the emergence of the Omicron COVID-19 variant only reinforces our view that it will continue to move very cautiously. In all, we think the MPC will announce further small measures to drain liquidity from the banking sector at the conclusion of its policy meeting on Wednesday 8th December as it continues to lay the groundwork for policy rate hikes from mid-2022.   Drop-In: India – How much scarring will the pandemic leave? 10:00 ET/15:00 GMT, Wednesday 1st December https://event.on24.com/wcc/r/3535749/63CC51718846E8FF3D871827AC84AF1E?partnerref=report Drop-In: Why is Asia sitting out the global inflation surge? 09:00 GMT/17:00 HKT, Thursday 2nd December https://event.on24.com/wcc/r/3546145/A9D34EF592141BEFCAC819ADB40359D5?partnerref=report

1 December 2021

RBI Watch

Rate hikes remain a distant prospect

Policy rates are highly likely to be left unchanged at the conclusion of the RBI’s upcoming MPC meeting on Friday 8th October, particularly given the recent drop in inflation. The committee might announce further measures to drain liquidity from the banking sector, but these will probably not amount to anything more than marginal tweaks. The big picture is that policy will remain very accommodative for several months yet.

29 September 2021

RBI Watch

RBI in no rush to tighten

Policy rates are highly likely to be left unchanged at the conclusion of the RBI’s upcoming MPC meeting on 6th August, particularly given that inflation now appears to have peaked. Further ahead, we don’t anticipate any tightening for several more months. And when policy normalisation does proceed, it is likely to be gradual, perhaps starting with the slow removal of liquidity support before policy rates are increased.

29 July 2021
More Publications

RBI Watch

Policy to remain loose for a long time yet

We agree with financial markets and the analyst consensus that policy rates will be left on hold at the conclusion of the RBI’s upcoming MPC meeting on 4th June, particularly given that the worst of the current virus wave now appears to be over. But any recovery will remain fragile, especially while the vaccine rollout remains stuck in first gear. So even as some EM central banks look to begin normalising policy later this year, the RBI is likely to keep rates unchanged for a long while yet.

RBI Watch

RBI unlikely to follow its EM peers

EM monetary policy has turned decidedly more hawkish in recent weeks. But, with a renewed surge COVID-19 infections a downside risk to India’s recovery, we don’t think the Reserve Bank will be joining the EM rate-hiking club in its policy meeting next week or any time soon. Another key point of interest will be the government’s proposals for the RBI’s inflation-targeting framework. Both band widening and shifting the focus to core inflation have been suggested, but we don’t expect any changes.

RBI Watch

Don’t rule out a rate cut

Financial markets and analysts appear convinced that policy rates will be left on hold at the conclusion of the MPC meeting on Friday 5th February, but we aren’t so sure. We think the recent sharp drop in headline inflation could be enough to trigger a 25bp rate cut. Beyond the coming meeting, we also think that markets are too hawkish in pricing in modest rate hikes over the next 12-18 months.

27 January 2021

RBI Watch

Policy will remain loose for a long time to come

We agree with financial markets and the consensus that India’s policy rates will be left unchanged at the conclusion of the MPC meeting on Friday. Further ahead however, we think that markets are wrong to expect rate hikes within the next 12-18 months, despite the growing likelihood of a rollout of an effective vaccine by then. In fact, on balance, the RBI is more likely to loosen policy a little further over the coming months as the COVID-19 restrictions that have pushed up core inflation get scaled back.

30 November 2020

RBI Watch

Loosening cycle is not over yet

We agree with market and analyst expectations that the Reserve Bank’s new-look MPC will keep rates on hold at the conclusion of its meeting on Thursday 1st October. But with inflation set to drop sharply and the growth outlook dire, we remain non-consensus in expecting a resumption of the easing cycle over the coming months.

1 to 8 of 29 publications
See More ↓