New Delhi, June 1: The Reserve Bank of India’s Monetary Policy Committee (RBI-MPC) is likely to keep interest rates unchanged during its meeting scheduled for June 3-5. This decision comes in response to rising inflation concerns driven by a sharp increase in crude oil prices, according to a report released on Monday.
The report from MK Global Financial Services noted a 22% decline in benchmark Brent crude prices, fueled by optimism surrounding the U.S.-Iran agreement. This decline has significantly improved India’s external account outlook over the past two weeks.
The company stated, “We expect the RBI to maintain interest rates next week, which is beneficial for India’s consumption recovery story and income cycle.”
The report also projected that crude oil prices could stabilize around $75-80 per barrel following the reopening of the Strait of Hormuz, which would support the Indian Rupee against the dollar. This situation would also aid the RBI in keeping the repo rate steady in the upcoming quarters.
With a 7% increase in petrol and diesel prices, inflation could rise to 4.5%.
Regarding liquidity, the report indicated that after the RBI injected $5 billion through a rupee-dollar swap, the surplus situation has narrowed to about 0.2% of net demand and term liabilities.
The report concluded, “We do not see any immediate cause for concern; once pressure on crude oil eases and consequently on the currency, the RBI will be able to restore liquidity conditions.”
Deposit growth remains healthy at an annual rate of 12.2%, but it is not keeping pace with loan growth.
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