In the next few days, the Central Bank of the country will hold a monetary policy meeting of the Reserve Bank of India. After which he will present his views ranging from interest rates to the country’s growth projections. It will also release its estimates regarding inflation. Before RBI says anything, the country’s leading private bank has released its estimates regarding inflation in the country. The leading bank estimates that the price of crude oil in the international market remains at $100 per barrel. If these prices remain constant then inflation in the country may cross the tolerance level of RBI. Experts estimate that RBI MPC may also revise its inflation estimate this time after the first meeting of the financial year. Let us also tell you which leading private bank has increased its inflation estimates.
Oil can spoil the game
If the price of crude oil remains above $ 100 per barrel, the retail inflation rate may exceed six percent, which is the upper limit of the range set by the Reserve Bank of India (RBI) and this may lead to an increase in interest rates. Foreign brokerage HSBC has made this estimate. Based on their analysis, HSBC economists said in a report that if the average crude oil prices remain below $ 100 per barrel, then the consumer price index (CPI) based inflation rate may remain below six percent. Economists said that if oil prices remain above $ 100 per barrel for a long time, the inflation rate could exceed six percent and this could possibly lead to an increase in interest rates.
What suggestion did the bank give?
Ahead of the bi-monthly monetary policy announcement next Wednesday, there is speculation whether the RBI will use the interest rates tool to manage the rupee against the dollar. The risks associated with such a step have also been mentioned in this report. The report says that resorting to interest rates to manage the rupee may prove costly, as pressure on economic growth may increase rapidly and unevenly with higher oil prices. Economists suggested that at present a neutral stance should be adopted on both monetary and fiscal fronts, because the supply situation has not yet completely normalized and boosting demand may increase inflation.
Who can get help from?
While clarifying the meaning of neutral stance in the report, it has been said that the fiscal deficit should be maintained around the level of financial year 2025-26 and help should be taken in controlling this deficit by increasing the prices of petrol and diesel. Along with this, the report says that if this shock in the energy sector continues for a few more weeks, then the pressure on economic growth may be greater than the impact of inflation.