Intro
BofA expects RBI to keep repo rate at 5.25%, monitoring inflation, monsoon, crude prices amid easing risks globally.
New Delhi
The Reserve Bank of India (RBI) is expected to maintain the repo rate at 5.25 per cent in the coming monetary policy reviews as easing geopolitical tensions provide greater stability to the global economic environment, according to a report by BofA Securities.
The report stated that the recently concluded US-Iran peace agreement has reduced a major source of uncertainty in global markets. As a result, the RBI may continue with its cautious and data-driven approach instead of responding to temporary fluctuations in crude oil prices and other external shocks.
Analysts believe the central bank will closely monitor key domestic indicators, including the progress of the southwest monsoon, trends in food inflation, and movements in international crude oil prices before making any changes to its policy stance.
At its June Monetary Policy Committee (MPC) meeting, the RBI unanimously decided to retain the repo rate at 5.25 per cent while continuing with a neutral policy stance. The decision reflected concerns over global economic uncertainties and evolving 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. These revisions were attributed to weather-related risks and uncertainties surrounding food prices.
Minutes of the MPC meeting showed that all members acknowledged rising inflation risks and the volatile economic backdrop. However, policymakers noted that underlying inflationary pressures remain largely contained, with no significant signs of broad-based second-round effects on prices.
The report further observed that the RBI’s June “dove-hawk meter” continues to place the MPC in a neutral to moderately dovish zone. This suggests that policymakers have not shifted toward a more aggressive anti-inflation stance since the April meeting and remain committed to a balanced, data-dependent policy approach while assessing future economic developments carefully.
BOX
- RBI likely to keep repo rate unchanged.
- Easing geopolitical risks support policy stability.
- RBI remains neutral to moderately dovish.
- Inflation risks monitored, but pressures contained.
- Growth forecast cut; inflation outlook raised.
