RBI Drains Liquidity Amidst Surplus as Global Central Banks Weigh Rate Hikes

The upcoming week promises to be filled with crucial economic data releases and policy decisions that will set the tone for India's growth trajectory. The Reserve Bank of India (RBI) is expected to conduct open-market bond sales, draining liquidity from the banking system amidst a large surplus. The US Federal Reserve, Bank of England, and Bank of Japan are also scheduled to take monetary-policy decisions.

The key economic data releases include India's August inflation numbers, which are expected to show whether higher food and fuel costs are spreading to a wider set of prices. Weak and uneven rainfall and higher fuel prices have put pressure on food prices, with the consumer price index (CPI) and wholesale price index (WPI) due on September 14.

India's August trade data will also offer an early indication of whether the country's external position is becoming more vulnerable to the latest oil shock. Merchandise exports have grown strongly in the first four months of FY27, but the composition of that growth has varied across months, with petroleum products being a major contributor.