<div id="readability-page-1"><div id="parent_top_div">Crude oil sustaining above $100 per barrel will push the headline inflation above 6 per cent, the upper level of RBI's tolerance band, and trigger rate hikes, a foreign brokerage has said. Economists at HSBC said that consumer price inflation (CPI) will remain below 6 per cent if oil prices average below $100 per barrel, as per its modelling. &#34;... Sustained oil above USD100/bbl would push inflation beyond 6 per cent, likely triggering rate hikes,&#34; the economists said, adding that we are at &#34;crossroads&#34; as Brent has averaged $100 in March. Amid speculation ahead of next Wednesday's monetary policy announcement on whether the RBI uses interest rates to defend the rupee, the report suggested risks of such a move. &#34;An interest-rate defence for the INR can be expensive when the growth drag becomes non-linear and intensifies quickly with higher oil prices,&#34; it said. The economists recommended adopting a &#34;neutral&#34; stance on both the monetary and fiscal fronts for now, as the supplies are yet to be cleared and stimulating demand can stoke inflation. Pointing out that doing so would be akin to the experience during the COVID pandemic, the report said stimulating demand before supply was repaired led to high and sticky inflation back then. &#34;The lesson now is clear: avoid boosting demand too early. But this is a delicate balance. Policymakers don't want to overstimulate, but they also can't tighten so much that the growth slowdown deepens,&#34; it added. Elaborating on the &#34;neutral&#34; prescription, it said this would mean keeping the fiscal deficit close to FY26 levels and raising petrol and diesel prices to help contain the fiscal deficit. On the monetary side, the &#34;flexible&#34; inflation targeting framework allows inflation to stay within the 2-6 per cent range, it added. If the ongoing energy shock persists for a few more weeks, the growth drag could begin to outweigh the inflation shock, it said.</div></div>

HSBC

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HSBC economists warn that crude oil prices above $100 per barrel will push inflation beyond 6%, exceeding the RBI's tolerance band and likely triggering interest rate hikes. They recommend a neutral stance on monetary and fiscal policies to avoid overstimulating demand, which could lead to high inflation, as seen during the COVID pandemic. The report emphasizes the need to balance growth and inflation, suggesting that if the energy shock continues, the negative impact on growth may outweigh inflation concerns.

- Crude oil prices above $100 per barrel could push India’s inflation above 6 percent, prompting potential rate hikes, according to HSBC economists.  
- They advise maintaining a "neutral" monetary and fiscal stance to avoid overstimulating demand amid ongoing supply issues, cautioning that past experiences, such as during the COVID pandemic, showed the risks of boosting demand too early.  
- The report emphasizes that if high oil prices continue, the growth impact might surpass the inflation concerns, necessitating careful policy balancing.

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Crude sustaining above $100 will push inflation beyond 6%, says HSBC