{"id":422485,"date":"2026-04-06T07:26:20","date_gmt":"2026-04-06T07:26:20","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/422485\/"},"modified":"2026-04-06T07:26:20","modified_gmt":"2026-04-06T07:26:20","slug":"india-seen-holding-rates-as-goldilocks-phase-gives-way-to-stress","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/422485\/","title":{"rendered":"India seen holding rates as &#8216;Goldilocks&#8217; phase gives way to stress"},"content":{"rendered":"<ul data-testid=\"Summary\" class=\"summary-module__summary__QjADA\">\n<li data-testid=\"Body\" class=\"text-module__text__0GDob text-module__dark-grey__UFC18 text-module__regular__qJJtA text-module__small__sph8i body-module__base__o--Cl body-module__small_body__gOmDf summary-module__point__UgXPz\">RBI expected to inject liquidity, support rupee amid market stress<\/li>\n<li data-testid=\"Body\" class=\"text-module__text__0GDob text-module__dark-grey__UFC18 text-module__regular__qJJtA text-module__small__sph8i body-module__base__o--Cl body-module__small_body__gOmDf summary-module__point__UgXPz\">Economists see lower growth, higher inflation if oil prices stay elevated<\/li>\n<li data-testid=\"Body\" class=\"text-module__text__0GDob text-module__dark-grey__UFC18 text-module__regular__qJJtA text-module__small__sph8i body-module__base__o--Cl body-module__small_body__gOmDf summary-module__point__UgXPz\">Most analysts expect RBI to hold rates, with rate hikes seen as last resort<\/li>\n<\/ul>\n<p>MUMBAI, April 6 (Reuters) &#8211; India\u2019s central bank is expected to keep interest rates on hold on Wednesday as policymakers assess the fallout from the \u200bwar in Iran<br \/>\n , which <a data-testid=\"Link\" referrerpolicy=\"no-referrer-when-downgrade\" href=\"https:\/\/www.reuters.com\/world\/india\/gulf-war-batters-indias-glass-heartland-testing-new-delhis-manufacturing-drive-2026-04-02\/\" class=\"text-module__text__0GDob text-module__inherit-color__PhuPF text-module__inherit-font__1P1hv text-module__inherit-size__EyiQW link-module__link__INqxZ link-module__underline_default__-okuC\" rel=\"nofollow noopener\" target=\"_blank\">threatens the South Asian economy<\/a> and has battered its currency and bond markets.<\/p>\n<p>Instead, the focus is likely to be on calming \u200cfinancial markets, with assurances of readiness to support the weakening rupee and inject liquidity to keep bond yields in check, economists and traders said.<\/p>\n<p data-testid=\"promo-box\" class=\"text-module__text__0GDob text-module__dark-grey__UFC18 text-module__regular__qJJtA text-module__small__sph8i body-module__base__o--Cl body-module__small_body__gOmDf article-body-module__promo-box__hVl8h\"> Sign up  <a data-testid=\"Link\" referrerpolicy=\"no-referrer-when-downgrade\" href=\"https:\/\/www.reuters.com\/world\/india\/india-seen-holding-rates-goldilocks-phase-gives-way-stress-2026-04-06\/undefined?location=article-paragraph&amp;redirectUrl=%2Fworld%2Findia%2Findia-seen-holding-rates-goldilocks-phase-gives-way-stress-2026-04-06%2F\" class=\"text-module__text__0GDob text-module__inherit-color__PhuPF text-module__inherit-font__1P1hv text-module__inherit-size__EyiQW link-module__link__INqxZ link-module__underline_default__-okuC\" rel=\"nofollow noopener\" target=\"_blank\">here.<\/a><\/p>\n<p>All but two of 71 economists in a March 23\u201326 <a data-testid=\"Link\" referrerpolicy=\"no-referrer-when-downgrade\" href=\"https:\/\/www.reuters.com\/world\/india\/reserve-bank-india-hold-interest-rates-until-least-mid-2027-2026-03-27\/\" class=\"text-module__text__0GDob text-module__inherit-color__PhuPF text-module__inherit-font__1P1hv text-module__inherit-size__EyiQW link-module__link__INqxZ link-module__underline_default__-okuC\" rel=\"nofollow noopener\" target=\"_blank\">Reuters poll<\/a> forecast the Reserve Bank of India would keep the benchmark repo rate unchanged at 5.25%.<\/p>\n<p>The RBI\u2019s Monetary Policy Committee has cut rates by a cumulative 125 basis points in 2025 but paused at \u200bits February meeting. RBI Governor Sanjay Malhotra said in December that India\u2019s economy was in a \u201cGoldilocks\u201d phase \u2013 combining strong growth with low inflation \u2013 giving the \u200bcentral bank room to keep policy loose for an extended period.<\/p>\n<p>That assessment has since been upended by the worst energy shock in \u2060decades.<\/p>\n<p>&#8220;If the energy shock lingers, the growth drag could outstrip the price shock, reminiscent of the COVID\u201119 pandemic economy,&#8221; said Pranjul Bhandari, chief India economist at HSBC, in \u200ban April 2 report.<\/p>\n<p>The combination of weaker growth and rising inflation argues for a &#8220;neutral policy&#8221; stance that neither stimulates nor restrains demand, she said.<\/p>\n<p>In contrast<br \/>\n , financial markets have begun \u200bpricing in a more hawkish risk scenario. Since the Iran war began, traders in the overnight indexed swap (OIS) market have moved aggressively to price in the possibility of rate hikes, with one\u2011month contracts reflecting expectations of a hike as early as this month.<\/p>\n<p>Neeraj Gambhir, executive director for treasury, markets and wholesale banking products at Axis Bank, said swap rate pricing suggests investors assume the central bank may \u200bneed to tighten policy to defend the currency.<\/p>\n<p>Chart showing India&#8217;s policy repo rate rate, retail inflation and quarterly GDP growthCALMING MARKETS<\/p>\n<p>Concerns over a widening current account deficit and foreign outflows have pushed the rupee to a record low past 95 \u200bper U.S. dollar.<\/p>\n<p>The yield on India\u2019s benchmark 10\u2011year bond has risen to around 7.14%, its highest level in nearly two years, as investors fret over the hit to government finances from higher \u200cenergy costs.<\/p>\n<p>&#8220;We \u2060expect the RBI to continue injecting abundant liquidity into the system, ensuring easy financial conditions to help the economy tide over the shock,&#8221; said Aastha Gudwani, chief India economist at Barclays.<\/p>\n<p>Barclays expects the RBI to persist with bond purchases, short\u2011term liquidity injections and longer\u2011term foreign\u2011exchange swap operations.<\/p>\n<p>The central bank has taken steps to <a data-testid=\"Link\" referrerpolicy=\"no-referrer-when-downgrade\" href=\"https:\/\/www.reuters.com\/world\/india\/indias-rbi-bars-banks-offering-clients-rupee-non-deliverable-forwards-amid-2026-04-01\/\" class=\"text-module__text__0GDob text-module__inherit-color__PhuPF text-module__inherit-font__1P1hv text-module__inherit-size__EyiQW link-module__link__INqxZ link-module__underline_default__-okuC\" rel=\"nofollow noopener\" target=\"_blank\">curb speculation<\/a> in the forex markets.<\/p>\n<p>Further measures to support the rupee \u2013 including a special forex swap window for oil companies or schemes to encourage inflows from non\u2011resident Indians \u2013 also cannot be ruled out, Gudwani said, adding \u200bthat defending the currency by raising interest \u200brates would not be the central \u2060bank\u2019s first line of defence.<\/p>\n<p>LOWER GROWTH, HIGHER INFLATION<\/p>\n<p>The RBI is due to present its first forecasts for growth and inflation for the 2026\u201127 financial year, and economists expect it to pare its previously optimistic outlook.<\/p>\n<p>Much will hinge on the oil price assumptions underpinning those \u200bforecasts, with economists outlining a wide range of scenarios depending on how long energy prices stay elevated and supply disruptions \u200bpersist.<\/p>\n<p>HSBC estimates GDP growth \u2060would slow to 6.3% from an expected 7% this year if oil prices average $80 per barrel, and to 6% if prices remain closer to $100.<\/p>\n<p>Inflation, which cooled to 3.2% in February, is seen averaging around 5% if oil prices stay near $100 a barrel.<\/p>\n<p>Oil prices sensitivities to key economic variables for India<\/p>\n<p>&#8220;Rising inflation risks increase our conviction that the RBI will keep policy rates firmly on hold,&#8221; said J.P. Morgan chief \u2060India economist Sajjid \u200bChinoy in a March report.<\/p>\n<p>&#8220;The bar for any rate hike is very high and would require a \u200bsustained supply shock that pushes headline inflation well above target for the foreseeable future,\u201d he added.<\/p>\n<p>India\u2019s inflation target was reaffirmed last month at 4%, with a tolerance band of plus or minus 2 percentage points.<\/p>\n<p data-testid=\"SignOff\" class=\"text-module__text__0GDob text-module__dark-grey__UFC18 text-module__regular__qJJtA text-module__extra_small__8Buss body-module__full_width__kCIGb body-module__extra_small_body__Bfz20 sign-off-module__text__LQAMP\">Reporting by Jaspreet Kalra; additional reporting by Gopika Gopakumar; Editing by Sam Holmes<\/p>\n<p data-testid=\"Body\" dir=\"ltr\" class=\"text-module__text__0GDob text-module__dark-grey__UFC18 text-module__regular__qJJtA text-module__small__sph8i body-module__base__o--Cl body-module__small_body__gOmDf article-body-module__element__5eCce article-body-module__trust-badge__5mS3f\">Our Standards: <a data-testid=\"Link\" target=\"_blank\" referrerpolicy=\"no-referrer-when-downgrade\" href=\"https:\/\/www.thomsonreuters.com\/en\/about-us\/trust-principles.html\" rel=\"noopener nofollow\" class=\"text-module__text__0GDob text-module__dark-grey__UFC18 text-module__medium__2Rl30 text-module__small__sph8i link-module__link__INqxZ link-module__underline_default__-okuC link-module__with-icon__qlg76\">The Thomson Reuters Trust Principles., opens new tab<\/a><\/p>\n<p><a href=\"https:\/\/www.reutersagency.com\/en\/licensereuterscontent\/?utm_medium=rcom-article-media&amp;utm_campaign=rcom-rcp-lead\" target=\"_blank\" dir=\"ltr\" class=\"button-module__link__A3sD0 button-module__secondary__70gBu button-module__round__QDFgq button-module__w_auto__Sem-F\" data-testid=\"LicenceContentButton\" rel=\"nofollow noopener\">Purchase Licensing Rights<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"RBI expected to inject liquidity, support rupee amid market stress Economists see lower growth, higher inflation if oil&hellip;\n","protected":false},"author":2,"featured_media":422486,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[174],"tags":[2786,82703,79,84370,84149,87973,87974,84146,83115,83116,179,84148,18,82578,87582,9207,19,2761,84365,84368,84369,17,109547,83122,85212,87105,87106,189105,84116,88553],"class_list":["post-422485","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-asia","tag-asxpac","tag-business","tag-cen","tag-destef-markets-macromatters","tag-destnoinbsm","tag-destnointim","tag-destortao","tag-eci","tag-eco","tag-economy","tag-efmarkets-macromatters","tag-eire","tag-emrg","tag-frx","tag-gdp","tag-ie","tag-in","tag-infl","tag-int","tag-ipr","tag-ireland","tag-kmove","tag-mce","tag-plcy","tag-pre","tag-prev","tag-rbin","tag-sasia","tag-tracc"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/116356578475435665","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/422485","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=422485"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/422485\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/422486"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=422485"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=422485"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=422485"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}