New Delhi: The Reserve Bank of India (RBI) is expected to maintain its cautious monetary policy stance and keep the repo rate unchanged at 5.25 per cent in the upcoming policy reviews, according to a report by BofA Securities.
The report said easing geopolitical tensions, particularly following the recent US-Iran peace agreement, have reduced a major source of global uncertainty, allowing the central bank to focus more closely on domestic economic indicators while adopting a data-driven approach.
RBI likely to focus on domestic indicators
According to the analysis, the RBI is expected to closely monitor several key factors before taking any decision on altering interest rates.
These include the progress of the monsoon season, trends in food inflation and movements in international crude oil prices.
The report noted that with global risks showing signs of moderation, policymakers now have greater room to assess domestic economic conditions and incoming data before considering any changes to monetary policy.
Repo rate retained in June MPC meeting
At its June meeting, the Monetary Policy Committee (MPC) unanimously decided to retain the repo rate at 5.25 per cent and continue with a neutral policy stance.
The central bank cited concerns related to global economic conditions and geopolitical developments while announcing the decision.
The RBI also revised its macroeconomic projections during the meeting.
It lowered its GDP growth forecast for the financial year 2026-27 by 30 basis points to 6.6 per cent and raised its inflation estimate by 50 basis points to 5.1 per cent, citing weather-related risks and uncertainties surrounding food prices.
Inflation risks remain a concern
The minutes of the MPC meeting showed a unanimous view among policymakers that inflation risks have increased amid an uncertain global environment.
However, committee members also observed that underlying inflationary pressures remain contained and there are no immediate signs of broad-based second-round effects spreading across the economy.
The report said the current economic environment supports a data-dependent approach, enabling the central bank to carefully assess evolving economic indicators before making any policy adjustments.
No major shift in policy stance
BofA Securities further noted that the June “dove-hawk meter” continued to place the MPC in the neutral to moderately dovish category.
According to the report, 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 to strike a balance between supporting economic growth and keeping inflation under control while closely monitoring domestic and global developments.
With inflation concerns persisting and economic growth projections being revised lower, the central bank is expected to maintain its wait-and-watch approach in the coming months before deciding on any future changes to interest rates.