The reconstituted monetary policy committee (MPC) of the Reserve Bank of India with three new members will begin its three-day deliberations on Monday amid escalating West Asian tensions that have the potential of affecting crude oil supplies and its prices.

The Centre on Tuesday announced the appointment of Ram Singh, Saugata Bhattacharya and Nagesh Kumar as external members to the interest rate setting panel. They will replace Ashima Goyal, J.R. Varma and Shashanka Bhide whose term will end on October 4.

The new members will have a tenure of four years. They will not get any extension.

Observers largely feel the panel will retain the policy repo rate at 6.50 per cent for the 10th consecutive time and also keep unchanged its stance of the withdrawal of accommodation as the internal members from the RBI may turn cautious on fresh tensions between Iran and Israel.

Though the headline inflation number is below the mandated 4 per cent for two months, members such as RBI governor Shaktikanta Das, deputy-governor Michael Patra and Rajiv Ranjan, executive director, monetary policy department, may reiterate the need for durability in inflation before proceeding to any easing of rates.

A banking analyst from a foreign brokerage said the members could wait for more data amid fresh conflict in West Asia. The latest geopolitical risk could push any cut in rates to December 2024 or in February 2025.

While the decision of MPC will be announced by the RBI governor next Wednesday, the leanings of the three new external members will be known a fortnight later when the RBI releases the minutes of the meeting.
Bhattacharya’s media articles indicate he has a dovish stand on economy, but the positions of Singh and Kumar are unknown.

Oil prices rise

The rising tensions between Iran and Israel have resulted in firming up of crude oil prices.

Benchmark Brent crude (December delivery) was trading at 3 per cent higher at the time of writing this report as an Israeli diplomat said that Tehran will face ‘painful’ response after its missile attack.

Brent crude was at $75.75 per barrel, a rise of 2.95 per cent after crossing $76.14 a barrel earlier during the day.

“A major escalation by Iran risks bringing the US into the war,” Capital Economics said in a note.

The US stock markets opened in the red with the S&P 500 trading lower by 0.30 per cent and the Nasdaq by 0.41 per cent at the time of this report.

European stocks were also largely in the red with losses of up to 1.6 per cent.

In Asia, the Nikkei crashed 2.18 per cent and the Kospi by 1.22 per cent.

However, the Shanghai index zoomed more than 8 per cent on anticipation of positive economic data.

The domestic stock markets were closed on account of Gandhi Jayanti. They are however, expected to open weak due to the global developments.

The fresh tensions have also led to investors moving to safe haven assets. The US Dollar Index which gauges the greenback’s movement against a basket of six currencies was up 0.29 per cent at 101.49, while the 10-year US treasury was trading higher at 3.80 per cent.

Gold prices were, however, lower with its spot prices at nearly $2650.90 per ounce as traders awaited US economic data that included the non-farm payroll which will be released this Friday.

Meanwhile, a meeting of top OPEC+ ministers has kept oil output policy unchanged including a plan to start raising output from December, while also emphasising the need for some members to make further cuts to compensate for overproduction.

Several ministers from the Organization of the Petroleum Exporting Countries and allies led by Russia, or OPEC+ as the group is known, held an online joint ministerial monitoring committee meeting (JMMC) on Wednesday.

“The JMMC emphasised the critical importance of achieving full conformity and compensation,” OPEC said in a statement after the meeting. “Furthermore, the committee will continuously assess market conditions.”

With inputs from Reuters