The RBI is widely expected to raise its benchmark rate for the seventh consecutive meeting by 25 bps to a seven-year high of 6.75%, and leave the door open for more hikes to bring back inflation within its target range, economists said. Retail inflation rose 6.44% year-on-year in February and has remained above the central bank's mandated target band of 2%-6% for 10 out of the last 12 readings. Upside risk to RBI's January-March inflation forecast, firm core and above-target inflation reading in January and February are likely to see a majority in the monetary policy committee vote for a 25-bps hike, with an unchanged stance, DBS said. "Beyond that, we expect a pause on rates to allow the lagged impact of hikes to filter through, a likely benign inflation profile and attention on growth conditions."
Meanwhile, easing U.S. yields also aided similar moves in local bonds. The 10-year U.S. yield eased to 3.30% on Thursday as job openings indicated a dovish tilt from the Federal Reserve.
Traders will also await the first government debt auction of the current financial year. The government will raise 330 billion rupees ($4.03 billion) through the sale of bonds later in the day, which includes a new five-year bond as well as 7.26% 2033 bond that will replace the existing benchmark note soon. ($1 = 81.9250 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
