RBI Meeting Is About More Than Just Interest Rates for Markets

RBI Meeting Is About More Than Just Interest Rates for Markets Good morning... I’m Pratigya Vajpayee in New Delhi, and all eyes today are on the RBI. India’s central bank is poised to raise interest rates for the first time in nearly four years as rising inflation and a rupee near record lows force policymakers to shift gears. For markets, the importance of the policy meeting extends well beyond the rate call. The focus will also be on what more the RBI does to drain excess cash from the banking system. It has been aggressively reducing liquidity after its recent program to attract foreign-currency deposits from overseas Indians brought in larger-than-expected inflows. The cash glut has kept overnight borrowing costs below the policy rate, making financial conditions looser than intended. Investors will also be watching the RBI’s commentary on the rupee, especially given the recent record weekly drop in foreign-exchange reserves. Meanwhile, swap traders have even priced in another hike at the RBI’s next meeting, as we write below. In global markets, Asian shares are holding near a record after optimism over the earnings outlook propelled Wall Street benchmarks to fresh all-time highs on Tuesday. That could offer an early lift to the Nifty, which has risen in each of the past two sessions. In today’s newsletter, we also write about: