The Reserve Bank of India (RBI) is likely to keep the repo rate steady at 5.25 per cent in upcoming monetary policy meetings. This decision comes as geopolitical tensions ease, allowing policymakers to focus on economic data rather than reacting to uncertain global events. The US-Iran peace agreement has played a significant role in reducing uncertainty on the global stage, providing the RBI with the flexibility to adopt a data-dependent approach.
The central bank will closely monitor monsoon progress, food inflation trends, and crude oil prices before considering any shifts in policy direction. In the recent June MPC meeting, the RBI unanimously decided to maintain the repo rate at 5.25 per cent and uphold a neutral policy stance. This decision was influenced by concerns regarding the global economic environment and geopolitical factors.
Additionally, the RBI adjusted its macroeconomic forecasts, lowering the FY27 GDP growth projection by 30 basis points to 6.6 per cent. Simultaneously, the inflation estimate was raised by 50 basis points to 5.1 per cent, citing weather-related risks and uncertainties surrounding food prices. The MPC minutes revealed a unanimous acknowledgment of the increasing inflation risks amidst a volatile economic backdrop.
Despite the concerns, policymakers noted that the underlying inflation pressures remain contained, with no immediate indications of widespread second-round effects. The data-dependent approach was deemed appropriate given the current economic scenario. The June “dove-hawk meter” indicated a neutral to moderately dovish stance for the MPC, suggesting no significant shift towards a hawkish policy since the April meeting.
