A rebound in oil prices poses a risk to India’s benign inflation expectations that last week allowed the central bank to deliver its second rate cut of 2019. With crude at a five-month high, many investors are turning less confident about the Reserve Bank of India’s pace of monetary easing, though a slowdown in economic growth and subdued inflation still support an easing bias.
The low headline print gave Governor Shaktikanta Das and the rate-setting panel the space to cut rates by 25 basis points each in February and April to support the economy. Some economists see room for one more reduction provided food and fuel costs don’t spike. Data due Friday will probably show headline inflation quickened to 2.8 percent last month from 2.5 percent in February.
“The recent rise in crude prices, if sustained,” could pose a challenge to both economic growth and inflation outlook, said Dharmakirti Joshi, chief economist with Crisil Ltd. in Mumbai. Read More