RBI may keep repo rate unchanged at upcoming meeting

RBI may keep repo rate unchanged at upcoming meeting

The Reserve Bank of India (RBI) is likely to keep its key policy rate unchanged at 5.25% during the upcoming bi-monthly monetary policy meeting from June 3-5.

The decision comes in light of rising energy prices, persistent supply chain challenges, and a weakening rupee.

Some analysts believe these external factors could lead the RBI to revise its inflation forecast upward and lower its GDP growth estimate downward.

SBI report highlights volatile environment

SBI's economic research department predicts the RBI will maintain its current policy amid a volatile environment.

The report forecasts consumer price index (CPI) inflation to exceed 5% for the next three quarters, with Q4 FY26 real GDP growth at around 7.2%.

It also emphasizes that the Monetary Policy Committee (MPC) should consider exchange rates as a policy anchor beyond pure inflation targeting.

Bank of Baroda predicts RBI's inflation and GDP cuts

Madan Sabnavis, Chief Economist at Bank of Baroda, also expects no change in the repo rate or stance next week.

However, he predicts a cautious tone leaning toward hawkishness.

"We can expect RBI to increase their inflation forecast toward 5% and lower that on GDP more toward 6.5% from 6.9%," he said.

The RBI's annual report also stated it would review and improve GDP growth and inflation forecasting during this fiscal year.

Crisil expects neutral policy stance

Dipti Deshpande, Principal Economist at Crisil, expects the RBI to keep the policy repo rate unchanged and maintain a neutral policy stance.

"Inflationary pressures at present are largely supply-driven, stemming from elevated fuel and input costs, along with a weaker rupee. As such, the MPC may choose to look through these supply-side pressures in its policy assessment," she said.

Deshpande also noted that the prolonged disruption around the Strait of Hormuz has increased upside risks to inflation outlook.

ICRA warns of below-normal monsoon, El Nino impacts

Aditi Nayar, Chief Economist at ICRA, expects the MPC to remain cautious and keep rates unchanged.

This is in light of the India Meteorological Department's (IMD) warning about below-normal monsoon and El Nino conditions.

The IMD has predicted that southwest monsoon seasonal rainfall over India will be below normal, at 90% of the long-period average with a model error of 4%.