HDFC Bank Economist Projects Stable Rates, Rupee, Bond Yields Under Iran-US Ceasefire Scenario
Mumbai, April 8, KNT: The Reserve Bank of India (RBI) has maintained its policy rate and stance, opting for a cautious and patient approach amid heightened geopolitical uncertainty, according to Sakshi Gupta, Principal Economist at HDFC Bank.
In her assessment of the latest monetary policy, Gupta said the central bank refrained from taking any reactionary steps and instead adopted a balanced, “wait-and-watch” stance without signaling any hawkish shift. She noted that the policy outcome aligned with expectations, with no unconventional or out-of-the-box measures announced.
The RBI, however, acknowledged emerging upside risks to inflation, particularly driven by higher energy costs, and revised its inflation forecast for FY27 upwards. At the same time, it maintained a cautious outlook on economic growth, reflecting the uncertain global environment shaped by tensions in West Asia.
Gupta said the central bank balanced these concerns by reiterating that the Indian economy had strong underlying fundamentals prior to the ongoing conflict, which enhances its capacity to absorb external shocks. She added that the RBI’s reference to comfortable inflation starting points suggests that price pressures are likely to remain within the target band in FY27.
On the currency front, Gupta highlighted that the RBI’s remarks on the rupee conveyed confidence in its ability to manage excessive volatility, while continuing its policy of not targeting specific exchange rate levels.
Providing forward-looking estimates, Gupta projected inflation at 4.9% for FY27 and GDP growth in the range of 6.8% to 7.0%, assuming that the current geopolitical conflict remains short-lived and the ceasefire holds. Under this scenario, she said, the policy rate is likely to remain unchanged through FY27.
She also indicated that the rupee could stabilize in the coming days, while the benchmark 10-year government bond yield may ease and settle within a range of 6.8% to 7.0%.
The RBI’s latest policy stance reflects a calibrated approach aimed at balancing inflation risks with growth concerns, while navigating external uncertainties without resorting to abrupt policy changes. The central bank’s emphasis on stability and measured response underscores its focus on maintaining macroeconomic resilience amid evolving global conditions. [KNT]
