RBI may hold rates in August MPC as Q1 growth likely to cross 7 pc: Report
New Delhi, Aug 1
The Reserve Bank of India is likely to keep policy rates unchanged in its Monetary Policy Committee meeting this month, as consumer price inflation is expected to remain above 5 per cent for the next two quarters and Q1 FY27 domestic product growth may exceed about 7 per cent, a report said on Saturday.
The report from SBI Research said that $35 billion of capital inflows through July have recouped foreign exchange buffers by $12.5 billion by July 24 and vacated the outstanding forward position by $13 billion in the short end (up to 3 months) till June end.
The RBI MPC may, therefore, maintain a status quo on rates, the report said, adding that an explicitly dovish message is less likely given oil volatility, rupee pressure and external flow caution.
The upcoming RBI MPC meeting is scheduled for August 3-5, with the policy rate decision announcement set for August 5.
"Global economy remains uncertain amidst the West Asia crisis, with diverging trends visible across countries. The US economy slowed down unexpectedly in Apr-Jun 2026 quarter", the research firm noted.
"In the last three policies, RBI downgraded Q1 FY 27 GDP growth projection from 6.9 per cent to 6.6 per cent due to war in the Middle east. However, now we believe that situation has changed and Q1 growth print may be much better than anticipated," it noted.
Global currency dynamics remain unbalanced with the rupee bearing most of the brunt in March.
The report mentioned deft manoeuvrability by the RBI in altering the outstanding composition, with a focus on alleviating the pressure along the short or near end to support the rupee from depreciation expectations on account of hedging operations from exporters and importers.
Monsoon has recovered with July surplus showers reducing the nationwide rainfall shortfall to 13 per cent. Reservoir levels are near normal and kharif sowing is only 4.7 per cent lower than 2025 levels, supporting rural demand.
The bank's research wing also flagged concerns about a potential AI bubble. "Every major technological revolution attracts large amounts of capital, speculation, optimism, and sometimes, overoptimism. It is entirely possible that companies are over-investing in AI infrastructure today," it added.
— IANS
Reader Comments
From a homebuyer's perspective, I was secretly hoping for a rate cut. But the RBI is right to be cautious — we can't afford to let inflation run away, especially with food prices still a bit unpredictable. The monsoon recovery is a saving grace though; hopefully, kharif sowing picks up further and rural demand strengthens. 🌾
Good analysis, but why does the article mention 2026 dates? Feels confusing. Anyway, the point about AI bubble concerns is important — we should be careful with our investments. RBI's handling of the rupee with forward position adjustments shows they're being quite proactive. Let's see what happens in the MPC.
As a small business owner, stability is what I need right now. Fixed rates give us predictability. I'm glad RBI isn't panicking despite global turbulence. The $35 billion capital inflows are a good sign that foreign investors still believe in India's story. 🇮🇳
The mention of AI bubble is a valid concern — there's too much hype around it. The RBI should look beyond just inflation and growth and think about long-term systemic risks. But for now, status quo seems fine. Let's just hope crude doesn't spike any further, or the rupee will feel the heat.
With monsoon recovering and reservoir levels near normal, the rural economy should get a boost. Keeping rates steady is the right call — we don't want to be hasty. But I do wish the RBI would give some positive signals to the market; there's a lot of anxiety among the middle class about EMIs.
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