India’s central bank will probably raise its inflation outlook this week to reflect costlier oil, but leave borrowing costs steady and tap other policy tools it’s used before to help an economy facing new risks to recovery.
All economies surveyed by Bloomberg expect the Reserve Bank of India’s six-part monetary policy committee to hold the benchmark repurchase rate at 4% Friday, while only three out of 27 polled as of Wednesday see a hike in the reverse repurchase rate.
That will move the focus to any changes in language in the policy statement, as investors look for signs of normalizing monetary settings.
The key takeaway from Das will be on how the RBI intends to help the government’s 14.31 trillion rupees ($189 billion) debt program while keeping the sovereign’s borrowing costs under control when a faster global policy global approach to normalization is pushing yields higher.
Keeping a top on costs is crucial for Prime Minister Narendra Modi’s government as it tries to help to spend on infrastructure, create jobs and increase productivity in the economy.
Expectations are for the RBI to revive open-market operations or resort to Operation Twists, wherein it buys longer securities and sells more limited dated notes, to support the market in the midst of record debt supply. The two measures were utilized by the bank during the height of the pandemic, in spite of the fact that dealers aren’t expecting an announced purchase plan.