The Reserve Bank of India (RBI)'s six-member monetary policy committee, headed by Governor Urjit Patel, is scheduled to announce on Wednesday its sixth and final bimonthly monetary policy report for the financial year.
RBI is likely to keep its key rates on hold, but toughen its rhetoric as inflation has accelerated sharply, prompting an increasing number of analysts to expect a hike this year.
The outcome of the 6-member MPC meeting is being keenly awaited by stakeholders amid a huge sell-off in stock markets globally. Inflation is expected to accelerate after the Union Budget last week showed the government's fiscal deficit target for the fiscal year starting in April widening to help finance a sharp increase in spending in the rural areas and on health care. Bond investors are already pricing in rate hikes, with benchmark 10-year bond yields rising over 80 basis points since July, the biggest move since the 2013 rupee crisis. ALSO READ: RBI monetary policy 2-day meeting begins; to decide on key rates today In its December review, the MPC had kept the benchmark interest rate unchanged on concerns of a possible price rise but had left the door ajar for a rate cut in future. After the government presented the pre-budget Economic Survey to Parliament, Chief Economic Adviser Arvind Subramanian too had indicated that the scope for RBI to lower interest rate may be limited with growth picking up and inflation hardening.