The Reserve Bank of India is scheduled to reveal its monetary policy verdict after a three-day meeting led by Governor Sanjay Malhotra. Analysts widely predict that the repo rate will remain steady amidst geopolitical tensions and surging crude oil prices. The decision comes in light of escalating geopolitical issues in West Asia, which have driven up oil prices.
Experts anticipate a status quo on rates, although they foresee a cautious stance in the central bank’s forward guidance due to ongoing global uncertainties impacting India’s economic outlook. Economists expect the RBI to maintain its current position in the short term.
HSBC’s chief India economist, Pranjul Bhandari, suggests that while rates are likely to remain unchanged, a gradual tightening bias might emerge gradually. Market expectations currently point towards two rate cuts starting in the fourth quarter of 2026, rather than an aggressive tightening cycle.
Bhandari highlights the importance of the RBI’s updated projections, particularly in assessing the energy shock and potential revisions to crude oil assumptions. CareEdge Ratings’ analysis projects a 6.7% GDP growth for FY27, assuming crude oil prices average around $90 per barrel.
SBI Research also foresees a status quo on rates by the RBI, emphasizing a data-driven approach amidst persistent inflation risks and external volatility. They estimate GDP growth for FY27 at 6.6% and for FY26 at approximately 7.5%, with CPI inflation expected to stay above 5% for several quarters due to fuel price pressures and global shocks.
Emkay Global Financial Services predicts no changes in policy rates, citing lower crude oil prices and an improved external account outlook following corrections in Brent crude. In the previous meeting held in April, the MPC maintained the repo rate at 5.25% while upholding a neutral policy stance.
