RBI MPC Meet Next Week: No Rate Hike Likely Unless Crude Crosses $100, Says HSBC Report

New Delhi, April 2: The Reserve Bank of India is unlikely to hike interest rates at its upcoming Monetary Policy Committee meeting next week unless crude oil prices sustain above $100 per barrel, a report said on Thursday.

HSBC sees high bar for rate hikes

With "base case of oil averaging $80 per barrel in 2026, we expect no rate hikes", an HSBC Global Investment Research report said, adding that an interest rate defence for the rupee could prove costly if the growth drag from higher oil prices becomes non-linear and intensifies quickly.

The RBI's three-day policy meeting is scheduled from April 6 to April 8 — the first since the ongoing energy shock triggered by the West Asia conflict pushed Brent crude to average around $100 per barrel in March.

Recent policy moves spark speculation

The report comes days after the RBI moved on March 27 to sharply tighten onshore banks' net open foreign exchange positions, prompting speculation over whether an interest rate defence of the rupee would follow. HSBC pushed back on that view, saying the bar for rate hikes remains high.

Energy shock differs from past cycles

The investment also flagged that the current energy shock differs from past oil price cycles — it is not just higher prices but also quantity constraints across energy sources, amplified by quota systems and cascading into downstream sectors.

If the shock persists for a few more weeks, HSBC warned, the growth drag could begin to outweigh the inflation impact, making the situation resemble the pandemic more than the 2022 oil shock.

Inflation outlook tied to crude prices

On inflation, HSBC's model suggests that if oil averages below $100 per barrel, inflation should remain within the RBI's 6 per cent upper tolerance band under its flexible inflation targeting framework. However, sustained oil above $100 per barrel would push inflation beyond 6 per cent, likely triggering rate hikes.

Policy balance and fiscal recommendations

Drawing lessons from the pandemic, HSBC cautioned policymakers against stimulating demand before supply disruptions are resolved. "A key takeaway was that stimulating demand before supply was repaired led to high and sticky inflation," the report said, adding that the challenge now is striking a delicate balance — avoiding overstimulation while not tightening so much that the growth slowdown deepens.

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On the fiscal side, HSBC recommended keeping the deficit close to FY26 levels, noting that raising petrol and diesel prices would help contain fiscal slippage.

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