Daijiworld Media Network - New Delhi
New Delhi, Jun 21: The Reserve Bank of India (RBI) is expected to maintain its cautious approach and leave the repo rate unchanged at 5.25 per cent in the upcoming monetary policy reviews, as easing geopolitical tensions allow policymakers to focus more closely on domestic economic indicators, according to a report by BofA Securities.
The report said the recent US-Iran peace agreement has reduced a major source of global uncertainty, enabling the central bank to adopt a data-driven strategy instead of reacting to fluctuations in international energy prices.
According to the analysis, the RBI is likely to continue monitoring key factors such as the progress of the monsoon season, trends in food inflation and movements in crude oil prices before taking any decision on altering interest rates.
At its June Monetary Policy Committee (MPC) meeting, the RBI unanimously decided to retain the repo rate at 5.25 per cent while keeping its policy stance neutral, citing concerns related to global economic conditions and geopolitical developments.
The central bank also revised its macroeconomic projections during the meeting. It lowered its GDP growth forecast for FY27 by 30 basis points to 6.6 per cent and increased its inflation estimate by 50 basis points to 5.1 per cent due to weather-related risks and uncertainties surrounding food prices.
The minutes of the MPC meeting indicated a unanimous acknowledgement among policymakers that inflation risks have increased amid an uncertain global environment.
However, committee members also observed that underlying inflationary pressures remain under control, with no immediate signs of broad-based second-round effects spreading across the economy.
The report noted that this environment supports a data-dependent policy approach, allowing the central bank to assess incoming economic indicators before making any policy adjustments.
It further highlighted that the June "dove-hawk meter" continued to place the MPC in a neutral to moderately dovish category, suggesting that there has been no significant shift towards a more aggressive or hawkish monetary policy stance since the April meeting.
Analysts believe the RBI will continue balancing growth concerns with inflation management, while keeping a close watch on domestic and global developments before deciding on any future changes to interest rates.