The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) began its three-day policy meeting on Wednesday, with economists largely expecting the central bank to keep key interest rates unchanged amid inflation concerns and global uncertainties.
The policy decision will be announced on Friday by RBI Governor Sanjay Malhotra.
The June policy review comes against the backdrop of continuing geopolitical tensions and volatility in global crude oil and gas prices, factors that have complicated the economic outlook.
While most analysts expect the RBI to maintain the status quo on policy rates, they anticipate a cautious stance in its commentary due to persistent external risks and inflationary pressures.
Pranjul Bhandari, Chief India Economist at HSBC, said the central bank is likely to remain in a holding pattern in the near term, although a gradual tightening bias could emerge over time. She noted that financial markets are currently pricing in around two rate cuts beginning in the fourth quarter of 2026 rather than an aggressive tightening cycle.
According to Bhandari, the RBI’s updated projections will be closely watched, particularly its assessment of rising energy prices and whether it revises its crude oil price assumptions upward from earlier estimates of around 85 dollars per barrel.
She added that a higher crude oil assumption could push inflation projections closer to 5 per cent, compared with the earlier estimate of 4.6 per cent.
A report by CareEdge Ratings said inflationary pressures have increased amid expectations of a below-normal monsoon and recent retail fuel price hikes. The agency also pointed to the possibility of faster transmission of elevated wholesale inflation into retail prices.
The report noted that the current rise in inflation is largely supply-driven rather than demand-led. It projected India’s GDP growth at 6.7 per cent in FY27 if crude oil averages around 90 dollars per barrel. However, it warned that prolonged geopolitical tensions and crude prices nearing 110 dollars per barrel could pull growth closer to 6 per cent.
SBI Research also expects the RBI to leave the repo rate unchanged, citing a data-driven policy approach amid persistent inflation risks and external uncertainties. It has projected GDP growth of 6.6 per cent for FY27 and around 7.5 per cent for FY26, while consumer price inflation is expected to remain above 5 per cent for several quarters due to fuel price pressures and global shocks.
Meanwhile, Emkay Global Financial Services has also forecast a status quo on rates, pointing to easing crude oil prices and an improved external account outlook following a recent correction in Brent crude prices.
The brokerage said lower oil prices and any easing of geopolitical tensions could provide support to the rupee and allow the RBI to maintain its policy pause for a longer period.
-ANI
