MPC Meet Underway RBI Likely To Hold Rates As Inflation Risks Rise On Oil Spike

(MENAFN- KNN India) New Delhi, Apr 7 (KNN) The rate-setting panel of the Reserve Bank of India (RBI) began its three-day monetary policy meeting on April 6, with expectations of a pause in interest rates amid rising inflation risks linked to the West Asia conflict.

The decision of the six-member Monetary Policy Committee (MPC), headed by Governor Sanjay Malhotra, will be announced on April 8.

The RBI has cut rates by 125 basis points since February 2025-its most aggressive easing cycle since 2019. After a 25 basis point reduction in December, the central bank maintained the status quo in its February review, and a similar stance is widely expected this time, PTI reported.

Crude Oil Spike a Key Concern

Economists expect policymakers to weigh geopolitical tensions, especially in West Asia, along with volatility in commodity prices and currency movements.

Crude oil prices have surged from around USD 60 per barrel to over USD 100 since the conflict began in late February. Experts estimate that every USD 10 increase in crude prices could raise inflation by up to 0.6 percentage points, posing upside risks to price stability.

Currency Depreciation Adds Pressure

The Indian rupee has weakened by over 4 per cent during the period, increasing import costs and adding to inflationary pressures, particularly in fuel, transportation and core components.

Despite retail inflation easing closer to the RBI's 4 per cent target, these external risks are likely to keep the central bank cautious.

The MPC is expected to retain its 'neutral' policy stance, allowing flexibility to respond to evolving global and domestic conditions. The policy tone is likely to remain watchful, with emphasis on inflation risks and financial stability.

Liquidity and Market Conditions in Focus

Apart from inflation, the RBI will also monitor liquidity conditions, transmission of past rate cuts, capital flows, and bond market dynamics while shaping its policy outlook.

India continues to follow an inflation-targeting framework, with the government mandating the RBI to maintain retail inflation at 4 per cent (±2 per cent) through March 2031.

Latest data shows retail inflation rose to 3.21 per cent in February from 2.74 per cent in January, remaining within the target band but showing an uptick.

(KNN Bureau)

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