The Federal Reserve is expected to keep its benchmark repo rate unchanged at 5.25% in its April monetary policy review, as rising inflation risks linked to the Middle East crisis cloud the outlook, according to a poll of economists cited by PTI.Geopolitical tensions, volatile commodity prices and sharp currency movements – with the rupee hitting record levels – have complicated the policy path, with economists closely monitoring the central bank’s forecasts on growth, inflation and policy stance.“Given the uncertainty over crude oil prices and geopolitical developments, the RBI is likely to remain paused on April policy and closely monitor incoming inflation data before taking any further action,” said Aditi Nayar, chief economist at ICRA, as quoted by PTI.Chief Economist at the Reserve Bank of India, Soumya Kanti Ghosh, said the central bank would be cautious in announcing its decision. “India is not immune to the current crisis and is feeling the mercury rising. The rupee is already hovering above 93 per dollar and crude oil is insisting on crossing US$ 100 per barrel, leading to a jump in imported inflation across the states,” he said, adding that the expected “super El Niño” would also put pressure on inflation.
Under a base case scenario where inflation remains close to the MPC target, the central bank may consider a supply shock and keep interest rates unchanged, said Deepti Deshpande, chief economist at Crisil.The Reserve Bank of India has already cut the repo rate by 1.25% since last February, but maintained the status quo in policy reviews in August, October and February 2026.The six-member Monetary Policy Committee is scheduled to begin its April meeting on Monday, and a final decision is expected on Wednesday.Although retail inflation has eased to close to the Reserve Bank of India’s medium-term target of 4%, the recent rise in crude oil prices has raised concerns about second-round effects on domestic prices, especially in the fuel, transport and core inflation components, economists noted.It is estimated that every $10 per barrel increase in crude oil prices could lead to inflation rising by up to 0.60%. Crude oil prices have risen from around US$60 per barrel to more than US$100 since the conflict began in late February.
The rupee also weakened by more than 4% during this period, adding to imported inflationary pressures.“We do not expect any change in the repo rate or stance this time. The tone will be cautious and what we will be eagerly waiting for is the RBI’s forecasts for GDP and inflation given the prevailing uncertainty,” said Madan Sabnavis, chief economist at Bank of Baroda.Sakshi Gupta, chief economist at HDFC Bank, said moving interest rates based on short-term developments may not be wise given the ongoing volatility in global commodity markets.
“The central bank prefers to wait for clearer signals about the path of inflation,” she said.Economists noted that the Reserve Bank of India may review its inflation and growth forecasts in the next review to reflect evolving global risks, with the possibility of an upward revision of inflation expectations if crude oil prices remain high.Given the current scenario, the policy focus is expected to shift towards managing inflation rather than supporting growth.“While domestic growth conditions remain supportive, continued global uncertainty could impact exports and investment activity, requiring the RBI to maintain policy flexibility,” a treasury official at a private sector bank said.The central bank is also likely to maintain its neutral stance, indicating flexibility amid uncertain inflation dynamics and global developments. Liquidity conditions, transmission of past price changes, financial market stability, currency movements, capital flows and bond market dynamics are expected to remain key considerations for policymakers.
