The Reserve Bank of India’s Monetary Policy Committee will meet on April 3, 5 & 6, and will announce their interest rate decision on the last day of the meeting. The inflation rate has been rising since the Covid-19 pandemic and the Russia-Ukraine war hit the global economy. Last month, CPI inflation remained above the RBI’s target range of 2-6%. The central bank is expected to hike interest rates to tame surging inflation. After the April meeting, RBI MPC in 2023 will meet on June 6-8; then August 8-10; October 4-6; December 6-8; and finally on February 6-8, 2024 before the end of the financial year.
Since May 2022, RBI has raised interest rates by 250 basis points from 4% to 6.5%. The consumer price index (CPI) inflation eased slightly to 6.44% in February from 6.52% in January 2023, hovering above RBI’s upper band of 6%. Meanwhile, wholesale price index (WPI) inflation fell to a 25-month low of 3.85% in February. According to analysts the main reason behind the divergence between CPI and WPI is the difference in the weightage of the food basket and fuel prices. “ Food prices have been high due to cereals, milk, fruits, spices, etc. which reflects in CPI inflation… With global energy and metal prices cooling off from their highs, WPI inflation has been falling,” said Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities.
The US Federal Reserve in its FOMC meeting earlier this month hiked interest rates by 25 basis points. “The Fed hiked 25 bps at its March FOMC meeting but shifted its guidance from “ongoing increases” in favour of the less hawkish and less committal “some additional policy firming.” Consistent with that change, the median 2023 dot still shows one more hike this year. With only one inflation report and one non-farm payroll report before the May FOMC meeting, markets reflected even odds for a 25 bps hike or pause in May and are pricing 75 bps of Fed rate cuts by year-end starting from June. Whereas Chair Powell once again reiterated that no participant anticipates rate cuts this year and noted that the unchanged policy rate outlook was the product of generally firmer economic data,” said Madhavi Arora, Lead – Economist, Emkay Global Financial Services