The Reserve Bank of India (RBI) may maintain the repo rate at 5.25 percent in the upcoming monetary policy meetings. At the global level, geopolitical uncertainty has reduced after the peace agreement between America and Iran, due to which the central bank does not see the need to take any hasty steps. Brokerage firm BofA Securities believes that RBI will continue to adopt the strategy of wait and watch for the time being.
According to the report of BofA Securities, after the June Monetary Policy Committee (MPC) meeting, the economic environment has become more stable than before. However, fluctuations in the prices of food items and fuel still remain a matter of concern. RBI Governor Sanjay Malhotra has also indicated that some risks remain on inflation, but currently core inflation is under control. According to the report, the central bank will keep an eye on monsoon conditions, food prices and crude oil trends. Any future policy change can be considered only after the impact of these factors is clear.
growth rate estimate reduced
In the June MPC meeting, all the members had unanimously decided to keep the repo rate at 5.25 percent. RBI also maintained its neutral policy stance. However, the economic growth rate estimate for the financial year 2026-27 was reduced by 30 basis points to 6.6 percent. Along with this, considering the weather related risks, the inflation estimate has been increased by 50 basis points to 5.1 percent. The committee members acknowledged that the global situation and inflationary pressure still remain a challenge.
MPC members showed alertness
Internal members called for caution against raising interest rates prematurely. He believes that the current inflation is mainly due to supply-related reasons and increasing imported costs. In such a situation, hasty measures may affect economic activities. At the same time, external members also stressed the need to support economic development. He said that high prices of crude oil may increase inflation in future, but at present there is no need to increase interest rates. According to BofA Securities, the MPC’s stance in June was neither too strict nor too soft. The committee’s inclination remains neutral to mild. In such a situation, there seems to be little possibility of increasing the repo rate in the near future and the interest rates may remain at 5.25 percent only.
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