RBI MPC decision today, experts say rates likely to remain unchanged amid West Asia crisis
Mumbai, June 5
Reserve Bank of India Governor Sanjay Malhotra is set to announce the outcome of the Monetary Policy Committee meeting at 10 a.m. on Friday, with economists and market participants widely expecting the central bank to keep policy rates unchanged amid ongoing global uncertainties.
The three-day MPC meeting will conclude on Friday with the policy announcement, following which the RBI Governor will address a press conference at 12 noon.
At its previous policy meeting in April, the MPC unanimously decided to keep the repo rate unchanged at 5.25 per cent and retained its neutral policy stance. The Standing Deposit Facility (SDF) rate was maintained at 5 per cent, while the Marginal Standing Facility (MSF) rate remained at 5.5 per cent.
In its April policy review, the RBI projected India's GDP growth at 6.9 per cent for FY27 and estimated FY26 growth at 7.6 per cent. The central bank had also raised its retail inflation forecast for FY27 to 4.6 per cent from the earlier projection of 4.2 per cent.
Ahead of the policy decision, several economists and market experts have indicated that the central bank is likely to maintain the status quo on interest rates while closely monitoring inflation and growth trends.
Gita Gopinath, former Deputy Managing Director of the International Monetary Fund (IMF), recently told ANI that the RBI is balancing inflation risks arising from higher oil prices and currency depreciation against signs of softer economic activity.
According to Gopinath, the central bank is likely to remain on hold in the near term and continue with a data-dependent approach before taking any future policy action.
A report by Bank of Baroda also expects the RBI to maintain the status quo on rates, stating that the impact of the ongoing crisis in West Asia on economic growth remains difficult to assess.
Abhishek Bisen, Head Fixed Income at Kotak Mahindra AMC, said the June MPC meeting is taking place amid heightened uncertainty due to global conflicts, rising crude oil prices, sharp depreciation in the rupee and monsoon-related risks.
He noted that while consumer price inflation remains benign at 3.48 per cent, rising wholesale inflation and higher fuel costs are beginning to create inflationary pressures.
He said, "While markets are pricing in potential rate hikes ahead, the RBI is likely to hold the repo rate at 5.25 per cent for now, but adopt a more hawkish tone--raising inflation forecasts, slightly trimming growth projections, and relying on forex tools to manage currency volatility".
Rohit Arora, CEO and Co-Founder of Biz2X and Biz2Credit, said the upcoming policy decision will be important in shaping market sentiment amid global uncertainty, fluctuations in crude oil prices and challenges in international trade.
He said, "On the other hand, it should be mentioned that RBI has noted that the country's economy is still resilient, and there is robust domestic demand in combination with positive banking and financial sector trends along with the rapid development of digital finance. These facts suggest that the policymakers will adopt a balanced approach".
Market participants will closely watch the RBI's commentary on inflation, growth, currency stability and the impact of global developments, particularly the ongoing tensions in West Asia, for cues on the future direction of monetary policy.
— ANI
Reader Comments
Honestly, I'm tired of this status quo nonsense. Home loan EMIs are killing us. The RBI keeps saying 'data dependent' but when will they actually act? 5.25% for how many quarters now? Meanwhile, banks keep cutting FD rates and we small savers suffer. Please think of the aam aadmi too! 😤
Good to see RBI not panicking. In these global uncertainties, stability is key. Our economy is resilient because of sound policy. Gita Gopinath's observation about balancing inflation vs growth is spot on. Let the data guide the decision, not populist pressure. India is in a sweet spot compared to many nations. 🇮🇳
As a small business owner, this status quo hurts. Borrowing costs are already too high for MSMEs. I wish RBI would do something to ease credit flow to the real sector. But I understand the inflation concerns. Just hope they at least signal something positive for the next quarter. Business sentiment is fragile. 🤞
The real issue is the depreciation of rupee against the dollar. Even if RBI holds rates, if rupee keeps falling, imported inflation will eat into our savings. The MPC needs a more comprehensive strategy beyond just repo rate. Also, monsoon is a wildcard this year. Let's hope for the best.🙏
Why does RBI always have to be so cautious? West Asia crisis will eventually resolve. Meanwhile, our growth is slowing. 6.9% GDP projection for FY27 is okay but not great. Other countries are
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