The Monetary Policy Committee is likely to hike the benchmark rate by 35-50 basis points as it fights multiple challenges of escalating geopolitical tension in Ukraine, a hawkish US Fed, plunging rupee, mixed growth signals, and rising food inflation
The Reserve Bank of India’s (RBI) six-member rate setting panel will meet next week to frame the bi-monthly monetary policy. In its meeting in August, inflation seemed to be on a downward trajectory and growth prospects appeared rosy. This time around, higher food prices pose a big concern, and several ratings agencies have slashed India’s growth outlook for the current fiscal.
On the global front, the situation in Ukraine may worsen with Russia announcing partial military mobilisation for its citizens, stoking growth challenges and uncertainty. Most importantly, a relentless US Federal Reserve—that is determined to stamp out historically high inflation with a series of steep rate hikes—may roil market sentiments.