The Reserve Bank of India (RBI) is expected to keep the benchmark repo rate unchanged in its June monetary policy review, according to a survey of economists and treasury experts.
A majority of respondents believe the central bank will maintain the status quo in the upcoming Monetary Policy Committee (MPC) meeting scheduled for Friday, while a smaller section expects a 0.25 per cent rate hike. Of those surveyed, 11 participants anticipate no change in policy rates, whereas four forecast a modest increase.
“Pause is likely as headline inflation continues to remain below the 4 per cent target. The RBI currently has sufficient policy space to assess the second-round impact of recent fuel price hikes. Given the flexible inflation targeting framework, the central bank can afford to look through the immediate impact of supply-side shocks,” said Gaura Sengupta, economist at IDFC First Bank.
The MPC is set to meet between June 3 and June 5 to decide on interest rates. The RBI has already reduced the repo rate by 1.25 per cent over the past year in an effort to support economic growth. Economists said the expected pause reflects the RBI’s cautious approach as it evaluates the inflationary impact of recent fuel price increases and evolving geopolitical risks before taking further policy action.
Despite expectations of no immediate change in June, most respondents foresee a tightening cycle resuming in FY27. A majority expect at least two rate hikes during the fiscal year, while some predict even more increases if inflation pressures persist. Only a small minority anticipate a single hike over the period.
“We now expect the MPC to begin rate hikes from the June meeting itself, as domestic inflation risks are rising alongside elevated global bond yields. Several Asian central banks have already surprised markets with rate increases. Our FY27 outlook carries upside risk of 0.25–0.50 per cent in case commodity prices and the rupee remain under pressure,” said Anubhuti Sahay, Head of India Economic Research at Standard Chartered Bank India.
The survey indicated a strong consensus that the RBI is likely to revise its inflation projections upward in the upcoming policy announcement. Most participants expect FY27 consumer price inflation estimates to be revised higher to around 4.9–5.5 per cent, driven by rising global crude oil prices and recent increases in domestic petrol and diesel rates.
Also read: Stock markets snap 4-day losses, Sensex up 382 pts
Icra Chief Economist Aditi Nayar noted that inflation could rise close to 5 per cent in June as higher fuel costs begin to pass through to retail prices, although the extent of second-round effects remains uncertain. Several economists said the central bank may prefer to wait for clearer evidence on whether the inflationary pressures are temporary or persistent before adjusting its policy stance.
Alongside higher inflation projections, many respondents expect the RBI to slightly lower its FY27 GDP growth forecast, reflecting concerns over elevated energy costs and global uncertainties, particularly those stemming from geopolitical tensions in West Asia.
While the revision to growth expectations is expected to be modest, economists warned that sustained high crude oil prices could weigh on domestic demand and overall economic activity over time. On liquidity conditions, most respondents do not expect any major policy changes in June. However, they anticipate the RBI will reiterate its commitment to ensuring adequate liquidity in the banking system and maintaining money market rates within the policy corridor.
Some experts also expect a review of administrative and regulatory measures related to the rupee and foreign exchange markets, aimed at ensuring orderly conditions. Others believe no immediate intervention is necessary, citing the expected liquidity boost from the RBI’s dividend transfer to the government.
“We expect measures aimed at supporting liquidity and ensuring money market rates remain aligned with the policy corridor, along with a review of administrative and regulatory measures for the rupee,” said Sachchidanand Shukla, Group Chief Economist at Larsen & Toubro.
Follow us
