People walk past Reserve Bank of India signage in front of an installation stall at Global Fintech Fest in Mumbai, India, on Aug. 28, 2024.
India's central bank may defy expectations that it will leave its benchmark interest rate unchanged during its monetary policy decision meeting on Friday.
The majority of economists polled by CNBC expect the Reserve Bank of India to keep rates unchanged at 5.25% while signaling a rate hike may only occur towards the end of the year.
Like India, Indonesia has been wrestling with a falling currency, and on May 20, the country's central bank raised its policy interest rates by a larger-than-expected 50 basis points.
Sri Lanka's central bank on May 26 raised its policy rate by 100 bps, the biggest hike in four years.
People walk past Reserve Bank of India signage in front of an installation stall at Global Fintech Fest in Mumbai, India, on Aug. 28, 2024.
India's central bank may defy expectations that it will leave its benchmark interest rate unchanged during its monetary policy decision meeting on Friday.
The majority of economists polled by CNBC expect the Reserve Bank of India to keep rates unchanged at 5.25% while signaling a rate hike may only occur towards the end of the year.
A minority expect policymakers to act at this week's meeting in a bid to anchor the rupee, which has depreciated to record lows against the dollar.
CNBC conducted a poll of nine economists over the past week, in the run-up to the RBI policy decision.
But it is "more logical," for India's central bank to chart a different course and raise interest rates, said Venugopal Garre, managing director and head of India research at Bernstein, speaking on CNBC's Inside India on Tuesday.
A rate hike will align India with "how global rates have moved in the more recent weeks," and could contain outflows at a time when "currency depreciation has been the biggest pain point for policy makers," he added.
India's regional peers have acted — some going beyond expectations — to get ahead of the inflation curve.
Like India, Indonesia has been wrestling with a falling currency, and on May 20, the country's central bank raised its policy interest rates by a larger-than-expected 50 basis points. Sri Lanka's central bank on May 26 raised its policy rate by 100 bps, the biggest hike in four years.
The Indian currency has been under pressure from its rising import bill and sustained capital outflows, even prompting Prime Minister Narendra Modi to appeal to citizens to help conserve foreign exchange.
Policymakers have also taken action to defend the embattled rupee, including selling dollars through state-run banks to stem its slide, according to a Reuters report. The government has also raised duties to curb demand for gold, a move aimed at conserving foreign exchange.
The rupee continues to be among the most fragile currencies in Asia, even though it has climbed off record lows and come close to the psychologically important 100 against the dollar.
