The Reserve Bank of India (RBI) is likely to maintain its wait-and-watch approach and keep the repo rate unchanged at 5.25 per cent in upcoming monetary policy meetings as easing geopolitical tensions reduce uncertainty and allow policymakers to focus on incoming economic data, according to a report.
As per analysis by BofA Securities, the conclusion of the US-Iran peace agreement has eased a key source of global uncertainty, giving the central bank more room to remain data-dependent rather than reacting to volatile energy prices.
The RBI will continue monitoring the progress of the monsoon, food inflation trends and crude oil prices before considering any change in policy direction, the report added.
The RBI had unanimously retained the repo rate at 5.25 per cent and maintained its neutral policy stance at the June MPC meeting amid concerns over the global economic environment and geopolitical developments.
In addition, the central bank revised its macroeconomic projections, lowering its FY27 GDP growth forecast by 30 basis points to 6.6 per cent while raising its inflation estimate by 50 basis points to 5.1 per cent, citing weather-related risks and uncertainties surrounding food prices.
The MPC minutes reflected a unanimous recognition of rising inflation risks and a volatile economic backdrop.
However, policymakers also acknowledged that underlying inflation pressures remain contained, with no immediate signs of broad-based second-round effects, according to the report.
The minutes showed unanimous recognition of the volatile economic backdrop and rising inflation risks. However, members noted that underlying inflation has remained contained, making a data-dependent approach an appropriate course of action, it said.
It further highlighted that June “dove-hawk meter” continued to place the MPC in a neutral to moderately dovish zone, indicating no meaningful shift towards a hawkish policy stance since the April meeting.
