By:- Mandar Pitale, Head, Financial Markets, SBM Bank Ltd.
The upcoming RBI Monetary Policy review is coming at the backdrop of a significant shock with higher oil prices due to Iran conflict. While the resulting pressures and uncertainties have induced stress through inflationary channels, but remaining manageable, at present, with domestic economy continuing to show adequate resilience.
Present growth-inflation dynamics is pointing towards risks to growth with a manageable inflation trajectory in the immediate future. This coupled with elevated global uncertainties, may result in MPC not considering the “rate hike” option in a hurry during the forthcoming MPC meeting in August.
MPC is expected to deliver cautionary guidance with global oil prices and monsoon remaining key monitorable for future policy actions. Oil prices moving up in USD 90 to 100 range per barrel for foreseeable future due to sustained tension will once again bring forward a strong case for generalised increase in price pressures ultimately percolating to demand side. This will create a strong skewness towards rate hikes in second half of FY 26 27.