Equity benchmark indices opened higher on Friday ahead of an interest rate decision by the country’s central bank, which has stuck to a loose monetary policy to support a post-pandemic economic recovery but is now faced with rising inflation.
The NSE Nifty 50 index was up 0.36 per cent at 17,701, while the S&P BSE Sensex rose 0.3 per cent to 59,212.42.
Even though inflation has breached the 6 per cent upper limit of the central bank’s target range for two months, a Reuters poll showed it will still wait at least a few more months before joining other central banks in raising rates.
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The Reserve Bank of India has for nearly two years kept the key repo rate at a record low of 4% and kept its stance accomodative until the economic recovery is firmly entrenched.
In support of this view, Governor Shaktikanta Das had last month said inflation was expected moderate despite a surge in global prices for crude oil.
“While, it is true that there are countries that are deviating from the US Federal Reserve’s hawkish rhetoric … India perhaps has some space to keep rates unchanged for now, but a prolonged deviation could be destabilising,” HDFC Bank’s Treasury Research team said in a preview note.
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