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The interest rates could see an upward movement if crude oil prices stabilise above USD 90 per barrel, amid rising inflationary pressures driven by global geopolitical tensions highlighted a report by Union Bank of India.The report noted that while the current stance remains a prolonged pause on policy rates, the outlook could change depending on the trajectory of inflation and global commodity prices.
"At present, we maintain our view of a prolonged pause on rates with a close watch on inflation trends. However, if oil prices stabilise above USD 90 per barrel, we see the possibility of a rate hike," the report stated. It added that consumer price inflation (CPI) for FY27 is likely to move sharply higher and remain above the 4.5 per cent mark, driven by elevated input costs and global uncertainties.The Reserve Bank of India, in its latest monetary policy announcement on April 8th, kept the policy repo rate unchanged at 5.25 per cent in the first policy review of the financial year 2026-27, citing rising global uncertainties and geopolitical tensions.The report also highlighted that wholesale price index (WPI) inflation has already shown signs of firming up. WPI inflation for FY26 stood at 0.70 per cent, while projections for FY27 are tracking above 5 per cent. On a monthly basis, WPI inflation rose sharply to 3.88 per cent in March 2026, up from 2.13 per cent in the previous month and 2.25 per cent in the same month last year.The increase in inflation was largely driven by a sharp rise in fuel prices. Fuel inflation turned positive and surged to 6.24 per cent compared to -3.64 per cent in the previous month, exceeding expectations. Food inflation, however, remained relatively stable at 1.86 per cent year-on-year, supported by a cooling trend in vegetable prices. Core inflation also witnessed an uptick, rising to 4.31 per cent from 3.91 per cent in the previous month. The report said that geopolitical developments, including the US-Iran conflict, along with rising commodity prices especially crude oil could further push inflation higher in the coming months. Going forward, the bank said the global geopolitical conflicts, input cost trends, crude oil dynamics and overall commodity prices should be monitored closely, as these factors will play a crucial role in shaping the inflation trajectory and monetary policy outlook. (ANI)
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