Economists See RBI Holding Rates Through FY27 With Oil Shock as Wild Card

Overview

• After the RBI kept the repo rate at 5.25% in April, most economists now expect a long pause in policy through FY27.
• The central bank projects FY27 consumer inflation at 4.6% and core inflation at 4.4%, setting a reference point for decisions.
• Market participants say high real interest rates and promised liquidity and currency support signal no rush to raise rates.
• A minority warns of possible tightening if oil costs feed into prices, with IndusInd Bank’s Gaurav Kapur seeing scope for up to 50 basis points over the next year.
• SBI researchers call the governor’s latest message the most cautious of his recent eight statements yet say a rate hike is not imminent.