Adding to the rise in crude oil prices, the hardening house inflation and rising core prices is likely to impart further upside risks to the baseline inflation trajectory.
Other than inflation, the higher crude oil prices could have negative implications on the economic growth of the country in the coming quarters. It may pose a threat on fiscal and current account deficit.
As per IIFL Research, RBI will maintain a long pause on the policy rates given the mounting inflationary pressures, concerns over fiscal slippage and on-going policy normalization by global central banks. Effectively, there are no chances for rate cuts. In fact, the central bank might adopt a relatively hawkish tone in the months ahead. However, can’t rule out the possibility of policy reversal during next fiscal.