India rate panel signals impending hikes, eyes inflation path for timing
India has kept policy rates unchanged so far this year, setting it apart from regional peers
The Reserve Bank of India's monetary policy committee signalled the potential for rate hikes this year despite maintaining interest rates unchanged, as they monitor inflation risks, according to minutes from their meeting released on Wednesday (Aug 19). Oil price surges driven by the Middle East conflict have heightened inflation concerns, leading markets to anticipate higher borrowing costs and putting pressure on the rupee.
However, headline inflation remained within the central bank's 2-6 per cent tolerance band at 4.45 per cent in July. RBI chief Sanjay Malhotra noted that while there are limited signs of inflation becoming generalised, it appears to be normalising from its previously low levels. He also warned that risks of broader-based inflation due to higher food, fuel, and input prices persist.
External member Saugata Bhattacharya emphasized the importance of tracking real rates, which impact savings and investment decisions. Meanwhile, deputy governor Poonam Gupta stated that there is no scope for further easing, and a rate hike may emerge during the fiscal year given the uncertainties from global developments and weather risks.
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