New Delhi, June 3: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has commenced its three-day meeting today. Experts believe that amid ongoing tensions in West Asia and global uncertainties, the central bank is unlikely to change interest rates this time. RBI Governor Sanjay Malhotra will announce policy decisions on Friday following the meeting.
This month’s monetary policy review comes at a time when geopolitical tensions in West Asia persist, causing fluctuations in global crude oil and natural gas prices. This has complicated the economic landscape further.
Most economists anticipate that the RBI will maintain stable interest rates; however, given global challenges, the tone of its statements may be more cautious or stringent than before.
According to Pranjul Bhandari, Chief India Economist at HSBC, the RBI may adopt a policy of keeping interest rates steady in the near future, but some tightening could be possible over time.
She mentioned that the market currently expects nearly two interest rate cuts starting in the fourth quarter of 2026, rather than significant tightening.
Bhandari emphasized that special attention will be paid to the RBI’s revised economic forecasts, particularly how it assesses ongoing shocks in the energy sector and whether it will raise its average crude oil price estimate from approximately $85 per barrel.
She noted that if the baseline estimate for oil prices increases, the inflation forecast could rise from the previous 4.6% to around 5%.
Additionally, a report from Care Ratings indicates that the pressure of inflation has increased due to concerns over a below-normal monsoon and recent hikes in retail fuel prices.
The report also stated that the impact of rising wholesale inflation on retail inflation could be faster than expected.
Currently, the increase in inflation is primarily due to supply-side issues rather than rising demand.
Care Ratings has projected a GDP growth rate of 6.7% for the fiscal year 2026-27, assuming the average price of crude oil remains around $90 per barrel.
However, the report warns that if conflicts in West Asia persist and oil prices approach $110 per barrel, the economic growth rate could drop to approximately 6%.
SBI Research also believes that given the persistent inflation risks and global instability, the RBI will not change the repo rate.
The report estimates a GDP growth rate of 6.6% for the fiscal year 2026-27 and around 7.5% for 2025-26. Furthermore, due to fuel prices and global shocks, the Consumer Price Index (CPI)-based inflation could remain above 5% for several quarters.
Moreover, MK Global Financial Services has also predicted that interest rates will remain unchanged. The brokerage firm states that recent easing in Brent crude prices and improvements in external economic conditions have provided relief to the RBI.
According to the brokerage, if oil prices decrease further and geopolitical tensions ease, this could strengthen the rupee and help the RBI maintain stable interest rates for an extended period.
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