RBI MPC review begins amid rupee, inflation pressures

The three-day meeting of the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) began on Wednesday, with markets, borrowers and investors closely watching the central bank's assessment of inflation, economic growth and currency stability amid a challenging global environment.According to information, RBI Governor Sanjay Malhotra is scheduled to announce the committee's policy decision on Friday, June 5. While economists broadly expect the central bank to keep the benchmark repo rate unchanged, attention is expected to centre on any revisions to the RBI's inflation and growth forecasts, as well as its commentary on the rupee.
The policy review comes at a time when geopolitical tensions in West Asia have pushed up crude oil and natural gas prices, disrupted supply chains and increased uncertainty in global financial markets. The Indian rupee has also come under pressure, adding to concerns over imported inflation.Market participants and economists expect the central bank to keep the benchmark repo rate unchanged in the June policy review. However, many expect the MPC to retain its "neutral" policy stance while adopting a more hawkish tone in response to rising inflation risks and heightened currency volatility.
Market participants believe the central bank may signal greater caution as higher energy prices and a weaker rupee could exert upward pressure on inflation in the coming months.
Abhishek Bisen, Head-Fixed Income at Kotak Mahindra Asset Management Company, said the June policy meeting is taking place amid elevated uncertainty stemming from global conflicts, rising crude prices, sharp rupee depreciation and monsoon-related risks.While consumer price inflation remains relatively benign at 3.48 per cent, Bisen noted that rising wholesale inflation and fuel costs indicate emerging price pressures. He expects the RBI to leave the repo rate unchanged at 5.25 per cent but adopt a more hawkish stance by raising inflation projections, trimming growth forecasts and continuing to use foreign exchange tools to manage currency volatility.
Madan Sabnavis, Chief Economist at Bank of Baroda, said he does not expect any change in either the repo rate or policy stance. However, he anticipates a cautious tone from the central bank, with inflation forecasts potentially revised upward to around 5 per cent and GDP growth estimates lowered to about 6.5 per cent from the current 6.9 per cent projection.The rupee is expected to feature prominently in the policy statement. The domestic currency has depreciated by more than 6 per cent so far in 2026, marking its weakest annual performance in a decade. Investors will be looking for indications of how the RBI intends to address exchange-rate volatility while preserving macroeconomic stability.
Meanwhile, the economic research department of State Bank of India has revised its FY27 inflation forecast to 5-5.1 per cent, warning that risks remain tilted to the upside. It has also pegged India's GDP growth at 6.6 per cent for FY27, while noting that the outlook remains vulnerable to evolving geopolitical developments.With financial markets largely pricing in an unchanged policy rate, analysts said the RBI's revised macroeconomic projections and policy commentary will be scrutinised for clues on the future trajectory of interest rates and monetary policy.The MPC's decision on Friday is expected to provide a clearer picture of how the central bank balances inflation concerns with the need to support economic growth in an increasingly uncertain global environment.

(Business Correspondent)