The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) began its three-day policy meeting on Wednesday, with experts widely expecting the central bank to maintain status quo on interest rates amid volatile global conditions, driven by ongoing tensions in West Asia
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NEW DELHI — The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) began its three-day policy meeting on Wednesday, with experts widely expecting the central bank to maintain status quo on interest rates amid volatile global conditions, driven by ongoing tensions in West Asia. The policy decision will be announced on Friday by Governor Sanjay Malhotra.
The June review comes amid sustained geopolitical tensions and volatile global crude and gas prices, which have complicated the outlook.
However, economists broadly expect the RBI to hold rates in the upcoming policy outcome, though most anticipate a more cautious or hawkish communication given persistent external headwinds.
According to HSBC chief India economist Pranjul Bhandari, the central bank is likely to remain in a holding pattern in the near term but with a gradual tightening bias emerging over time, with markets pricing in around two rate cuts beginning in the fourth quarter of 2026 instead of an aggressive tightening cycle.
RBI’s updated forecasts will be closely watched for its assessment of the ongoing energy shock and whether it revises its crude oil assumption higher from earlier levels of around $85 per barrel, according to her.
Bhandari further noted that higher base case could push inflation projections closer to 5 per cent versus the earlier estimate of 4.6 per cent.
According to an analysis by CareEdge Ratings, inflationary pressures have intensified due to expectations of a below-normal monsoon and recent retail fuel price increases, while also flagging the risk of faster second-round pass-through from elevated wholesale price inflation to retail inflation.
The report noted that the current uptick in inflation is largely supply-driven rather than demand-led. It projected FY27 GDP growth at 6.7 per cent assuming crude averages around $90 per barrel, but warned that prolonged conflict and oil prices near $110 per barrel could drag growth closer to 6 per cent.
In addition, SBI Research expected the RBI to keep the repo rate unchanged, citing a data-dependent approach amid persistent inflation risks and external volatility.
It pegged FY27 GDP growth at 6.6 per cent and FY26 growth at around 7.5 per cent, while CPI inflation could remain above 5 per cent for several quarters due to fuel price pressures and global shocks.
Similarly, Emkay Global Financial Services predicted a status quo on rates, citing easing crude prices and an improved external account outlook following a recent correction in Brent oil.
According to the brokerage, lower oil prices and any easing in geopolitical tensions could provide relief to the rupee and support a prolonged pause in policy rates.