The Reserve Bank Of India (RBI) May Leave All Rates Unchanged In Its April Policy, According To Brokerage BofA Securities.

Despite rising inflation, the Reserve Bank is expected to keep all key rates unchanged and maintain its accommodative posture at its policy review later this week, according to a Wall Street brokerage.

In a pre-policy note released on Monday, Bank of America Securities India said it expected the RBI-MPC to keep all rates on hold on April 8 and maintain its accommodative posture. However, despite rising downside risks to growth, the central bank will be pressured to adjust up its CPI inflation prediction due to supply-side concerns.

The brokerage also expects the RBI to announce measures to ensure smooth execution of the government borrowing programme, which has frontloaded debt raising by opting to raise as much as 59.1%, or 8.45 lakh crore, of the full-year gross borrowing of 14.3 lakh crore in the first half, which many believe will delay policy normalisation.

The super-dovish February policy was anchored by the comfort afforded by the predicted improvement in inflation.

Brent crude has increased by 21%, domestic gasoline and diesel pump prices have increased by 6.5 percent, domestic LPG cylinder prices have increased by 6%, commercial LPG has increased by 12.5%, and edible oils have increased by roughly 12% since the February meeting.

In light of this, the RBI is projected to raise its FY23 average CPI inflation projection from 4.5 percent and see negative risks to its real GDP growth forecast of 7.8 percent, according to the report.

The brokerage predicts average CPI inflation of 5.5 percent in FY23, with a 30 basis point upside risk, and real GDP growth of 7.9 percent per cent with downside risks.

However, it does not envisage the RBI resorting to faster or sharper policy repo rate hikes because it is committed to sustaining growth, as governor Shaktikanta Das recently stated "It will be detrimental to start launching a premature demand compression by monetary policy action. The demand side difficulties are addressed by monetary policy "..

In June, the RBI is expected to turn neutral while also lifting the reverse repo rate by 40 basis points, normalising the policy corridor, and delivering the first repo rate hike of 25 basis points in August, according to the agency.