Capital Economics: Reserve Bank of India Not in a Hurry to Raise Rates, Will Observe How the Energy Crisis Develops

Golden Ten Data reported on April 8 that economists at Capital Economics wrote in a report that the Reserve Bank of India’s meeting indicated it is not in a rush to raise interest rates, even as it acknowledged the economic risks posed by the Middle East conflict. Ultimately, the central bank’s policy outlook will depend on how the crisis unfolds. Economists stated that if the US-Iran ceasefire holds and energy prices stabilize, the Reserve Bank of India may regard any effects on inflation and economic activity as temporary, supporting the case for keeping rates unchanged. However, if the conflict reignites, Gulf infrastructure suffers significant damage, inflation surges above the target, and the rupee weakens further, then the central bank will be more inclined to tighten policy, even though this could impact growth.