The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) will give its decision on interest rates today. This meeting is being considered one of the most important meetings in recent years, because the economy is facing many challenges. RBI Governor Sanjay Mehrotra faces a big challenge of striking a balance between inflation and economic growth.
The biggest question among economists is whether RBI will start increasing interest rates. Rising inflation, weakening rupee and recent increase in fuel prices have further intensified this debate. Some experts believe that RBI may decide to increase the repo rate for the first time today.
Rupee weakness and inflation are increasing concerns
The rupee has weakened by 6.4% against the US dollar in 2026 and has been among the weakest performing currencies in Asia. At the same time, due to increase in fuel prices, pressure on inflation is increasing. In such a situation, some economists believe that RBI may have to increase interest rates.
However, many experts also believe that raising interest rates only to handle the rupee or support the foreign exchange market would not be the right strategy. He says that this can have a negative impact on economic development.
Dangers loom on growth rate too
Due to ongoing tension in West Asia and fear of El Nino, pressure on economic activities may increase. The Economic Review Report of May 2026 of the Finance Ministry has also warned of softening of consumption demand. According to the report, a weaker than normal monsoon and a possible slowdown in economic activity could impact demand in the coming months.
CRISIL and Yes Bank have estimated India’s economic growth rate at 6.6% for the financial year 2026-27, which is lower than 7.6% last year.
Inflation currently under control
Experts believe that inflation has not yet gone beyond the prescribed range of RBI. According to HDFC Bank economist Sakshi Gupta, RBI may keep interest rates stable in the policy meetings of June and August, as the real impact of the West Asia crisis is not yet completely clear.
However, if inflationary pressure continues till October, RBI may consider increasing interest rates. Currently, HDFC Bank estimates 6.7% growth rate and 5.1% inflation rate in the financial year 2026-27.
Will keep an eye on inflation expectations of families
RBI will also keep an eye on the Inflation Expectation Survey of Households to be released on June 5. According to recent data, people’s current inflation perception has increased to 7.2%. At the same time, inflation expectations for the next three months and one year have reached 8.5% and 8.8% respectively.
Experts say that if people’s inflation expectations continue to rise, it may be easy for the RBI to take the decision to increase interest rates. At present, the market’s eyes are fixed on the MPC’s decision on Friday.
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