Despite spiraling inflation, the Reserve Bank is probably going to hold key rates and retain the accommodative stance at the forthcoming policy review later this week, a Wall Street business has said.
Bank of America Securities India in a pre-policy note on Monday said it expects the RBI-MPC to stay on hold on all rates on April 8 and hold its accommodative stance. In any case, the central bank will be pushed to revise upwards its CPI inflation forecast because of supply-side issues even as downside risks to growth rise.
The brokerage is likewise expecting the RBI to announce measures to ensure non-problematic execution of the government borrowing program, which has frontloaded the debt raising by deciding to raise as much as 59.1 percent or ₹8.45 lakh crore of the entire year gross getting of ₹14.3 lakh crore in the first half, which many feels will delay policy normalization.
The comfort provided by the expected improvement in inflation was the anchor for the super-dovish February policy.
Since the February meeting, Brent crude has gone up 21%, domestic petroleum, diesel pump prices are up 6.5 percent, homegrown LPG cylinder price is up 6%, and business LPG is up 12.5 percent, and edible oils are up around 12%.
Against this backdrop, the report said the RBI is expected to revise its FY23 average CPI inflation forecast from 4.5% and sight downside risks to their real GDP growth forecast of 7.8%.