Economists Predict No Rate Changes in FY27 Amid Global Energy Price Stability
'Rate action unlikely in FY27; if any, it could be a rise,' say economists
The Economic Times
Image: The Economic Times
Economists predict that the Reserve Bank of India will maintain its policy rate at 5.25% through FY27, with no immediate rate hikes expected. Although inflation risks persist, the impact of rising global energy prices is being managed, leading to a cautious outlook on monetary policy.
- 01The Reserve Bank of India is expected to keep the policy rate unchanged at 5.25% through FY27.
- 02Most economists anticipate no immediate tightening of monetary policy despite inflation risks.
- 03The next potential move in rates is likely to be an increase rather than a cut.
- 04The trajectory of policy rates will depend on the impact of global oil prices on domestic inflation.
- 05The ongoing geopolitical conflicts may influence future monetary policy decisions.
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Economists are forecasting that the Reserve Bank of India (RBI) will maintain its policy rate at 5.25% throughout FY27, with no immediate tightening expected. This outlook is supported by limited pass-through effects of rising global energy prices, as noted by economists at QuantEco Research. The RBI's focus remains on preserving financial stability amidst global risks, with projected headline inflation at 4.6% and core inflation at 4.4% for FY27. While some economists, like Gaurav Kapur of IndusInd Bank, suggest that a 50 basis points increase may be warranted within the next year, others caution that geopolitical tensions, particularly the ongoing conflict in Iran, could lead to lower growth and potentially lower rates. The RBI's April statement was described as one of the most hawkish in recent times, indicating a careful approach to future monetary policy adjustments.
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The decision to maintain the policy rate will help stabilize borrowing costs for consumers and businesses in India, especially amid rising inflation concerns.
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