RBI MPC Meet: Will The Central Bank Hike Repo Rate Amid West Asia Conflict?

RBI MPC Meeting: The Reserve Bank of India (RBI) is slated to announce its monetary policy decision on Friday, June 5. The RBI Governor Sanjay Malhotra-led Monetary Policy Committee (MPC) held its meeting for FY27 from June 3 to June 5 amid rising inflation woes, fuel price hikes, and global uncertainty.

The ongoing geopolitical tensions have led to elevated crude oil prices, adding pressure on India’s inflation outlook and fall in rupee against the US dollar.

Ahead of RBI's much awaited decision on repo rate hike, emerging economies (EM) like Indonesia, Philippines and Sri Lanka saw interest rate hikes, raising hopes that the RBI could take measures to further aid the rupee.

Meanwhile, the El Niño conditions, heatwave and below-normal monsoon is likely to be have an inflationary effect.

Key Expectations From RBI MPC

Ahead of the RBI's monetary policy decision today, Chief Economist at ASSOCHAM, Dr. S P Sharma, noted the RBI is likely to keep the repo rate unchanged at 5.25% given the latest developments at the global and domestic level to support the economy with its calibrated approach.

"I believe this is the right time to keep repo rate at the same level, status quo because economy is facing many headwinds, many challenges because of West Asia conflict and we have to support the growth trajectory of Indian economy as we are growing significantly during the last 4-5 financial years, more than 7% on an average," he said.

Further, he said that inflationary concerns are not from the demand side but triggered by supply factors like supply deficit of some commodities like the crude oil prices.

Also Read: RBI Monetary Policy: What Central Bank Stance Means For Bonds And Rupee

"We are not able to get those adequate quantities which are needed at the demand level. So, from the supply side, these challenges are creating the room for inflation to go up," he said.

Meanwhile, Naren Agarwal, CEO of Wealth1, noted that he expects the repo rate of 5.25% to be on a hold. There should not be any rate cut and this is the best thing to do.

At the same time, when we look at RBI, they are on a tight rope. The inflation at one end is under control at 3.5%, but on the other end, the crude is volatile. The rupee is depreciating and also we are sitting at the edge of an uncertain monsoon. So at this time, still, we look at RBI to control the repo rate and hold it at 5.25%.