New Delhi: Amidst ongoing tensions in West Asia, surging energy prices, and supply chain challenges, experts believe that the Reserve Bank of India (RBI) is likely to maintain its key policy interest rate—the repo rate—at 5.25 per cent this week. Furthermore, the central bank is expected to adhere to its cautious stance. The three-day meeting of the RBI’s six-member Monetary Policy Committee (MPC) is scheduled to take place from June 3 to June 5. RBI Governor Sanjay Malhotra will announce the policy decisions on June 5.
Some experts suggest that, driven by rising energy prices, a weakening rupee, and supply chain disruptions, the RBI may revise its inflation projections upward while simultaneously lowering its growth forecast for the Gross Domestic Product (GDP). In April, the RBI had kept the repo rate unchanged, adopting a “wait-and-watch” approach to assess the impact of the West Asian conflict on energy supplies, inflation, and economic growth. A report by the Economic Research Department of the State Bank of India (SBI) states that, given the prevailing volatile conditions, the status quo is likely to be maintained in the June monetary policy review.
According to the report, Consumer Price Index (CPI)-based inflation is expected to remain above 5 per cent over the next three quarters, while it is projected to hover between 4 per cent and 4.1 percent in the current quarter. The report forecasts real GDP growth at 7.2 per cent for the fourth quarter of the financial year 2025-26, with the full-year growth estimated at 7.5 per cent. Madan Sabnavis, Chief Economist at Bank of Baroda, also ruled out the possibility of any changes to the repo rate or the policy stance in the coming week. However, he noted that the RBI’s stance would remain cautious, and the central bank might raise its inflation forecast to approximately 5 per cent while lowering its GDP growth projection from 6.9 per cent to around 6.5 percent.
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In its annual report released on Friday, the RBI stated that it would review and refine its forecasting framework for GDP growth and inflation during the current financial year. CRISIL’s Principal Economist, Dipti Deshpande, noted that the RBI is likely to keep the repo rate unchanged and maintain a neutral policy stance. She added that current inflationary pressures are primarily supply-side driven, stemming from high fuel costs, elevated raw material prices, and a depreciating rupee.
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Tahir Qureshi is a senior sub-editor at India.com, whose primary duties are writing news related to different beats like National. World, Business, and viral. He also breaks stories and then follows t … Read More
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