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SocGen Look For RBI To Remain On Hold Next Week

RBI

SocGen look for the RBI to hold rates steady at next week's policy meeting... "The Silicon Valley Bank (SVB) blow-up has led to a dramatic shift in expectations of how the US Federal Reserve (the Fed) will choose to fight inflation. While the event has exposed the fragility of many of the less or unregulated US banks, banks in other geographies, especially in the EM world, appear to be far less vulnerable. This includes the India banking sector, which is proving quite resilient, although instability cannot be ruled out if the current bout of uncertainty and volatility morphs into full-on contagion.


"From its point of view, both headline and core inflation remain elevated, and hence a matter of concern, with a shallow easing momentum. However, the RBI’s immediate focus would be to ensure that the strength and vitality of the banking system has not been compromised as it tries to cope with the impact of monetary policy tightening. Hence, after having delivered the fastest repo hike pace in more than two decades, we believe it would make sense for the RBI to pause and take stock of the situation. This would allow the lagged effect of transmission of the monetary policy action to play through before deciding on the next rate action. Hence, we expect the central bank to keep the policy rate unchanged at 6.5% at its meeting next week."

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