RBI Likely to Keep Repo Rate Unchanged Amid Global Hike

The Reserve Bank of India's (RBI) Monetary Policy Committee has begun its three-day meeting, and experts expect the repo rate to remain unchanged. Despite rising global inflationary pressures and higher crude oil prices, the RBI is likely to keep interest rates steady this week, according to a Reuters poll.

Of the 72 economists surveyed, 68 expect the RBI to leave interest rates unchanged when Governor Sanjay Malhotra announces the policy decision on Wednesday. While some central banks have raised benchmark interest rates in response to higher inflation risks, India finds itself in a relatively comfortable position.

Retail inflation rose to 4.38% in June, crossing the RBI's 4% target for the first time in 17 months. However, it remains comfortably within the central bank's tolerance band of 2% to 6%. Core inflation, which excludes volatile food and fuel prices, has also stayed close to 4%, giving policymakers flexibility to wait for more data before considering any rate action.

However, economists believe that the RBI may eventually have to tighten policy if inflationary pressures continue to build. Trinh Nguyen, Senior Economist for Emerging Asia at Natixis, said that India's interest-rate swap markets are already pricing in roughly 75 basis points of rate hikes over the next 12 months.