Mumbai: The three-day meeting of the Reserve Bank of India’s rate-setting panel started Monday amid expectations of a status quo on the benchmark repo rate, with the Monetary Policy Committee slated to announce its decision August 5.
As global uncertainties and inflation risks persist, most experts expect the six-member Monetary Policy Committee (MPC) to adopt a cautious approach despite resilient domestic economic growth.
In June, the Reserve Bank had kept its key policy rate unchanged at 5.25 per cent and adopted a cautious wait-and-watch stance as policymakers assessed the fallout of the West Asia conflict.
The central bank had raised the retail inflation estimate for 2026-27 to 5.1 per cent from its earlier estimate of 4.6 per cent, largely due to mounting input costs, triggered by the pass-through of higher global energy prices to retail rates of petrol and diesel.
It lowered its GDP forecast for FY27 to 6.6 per cent from the 6.9 per cent estimated in April.
RBI Governor Sanjay Malhotra will announce the outcome of the bi-monthly meeting August 5.
Madan Sabnavis, Chief Economist, Bank of Baroda, said the credit policy comes at a time when global uncertainty still exists and there is little clarity on when the war will end. Therefore, crude oil prices and currency will remain volatile and rather hard to conjecture.
“At the same time, we have seen inflation inching upwards and it does look like that it will continue to move in the upward direction as food prices have started rising partly due to the season effects as well as monsoon.
“Growth on the other hand, going by high frequency indicators, is steady. Against this background, the MPC is likely to maintain status quo on repo rate as well as the stance,” Sabnavis said.
Dipti Deshpande, Senior Director and Principal Economist, Crisil Ltd, too expects the central bank to keep policy rates unchanged during its August review meeting.
“While the MPC may acknowledge emerging inflationary risks, we believe it will prefer to wait for greater clarity on the implications of two key shocks, namely the prolonged conflict in West Asia and ongoing monsoon uncertainties, for the growth-inflation dynamic.
“Both factors pose risks to the growth and inflation outlook, presenting policymakers with an increasingly delicate trade-off,” Deshpande said.
D K Srivastav, Chief Policy Advisor, EY India, said the first quarter growth is expected to be in the range of 7.1 to 7.3 per cent. At the same time, average CPI inflation during April-June remained close to the MPC’s mean target level of 4 per cent.
“…the monetary policy committee is likely to keep the repo rate unchanged at 5.25 per cent in its August 2026 monetary policy review… Going forward, RBI’s decisions regarding the policy rate will remain data-dependent given the continuing uncertainty regarding crude oil prices linked to the Middle-Eastern situation,” Srivastav said.
Vinay Pai, MD and Head of Fixed Income, Equirus Capital, expects the upcoming monetary policy to primarily be guided by domestic inflation, liquidity conditions and economic growth rather than mirroring global monetary policy developments.
“However, if elevated global yields persist and portfolio debt inflows moderate, the RBI is likely to maintain a neutral and cautious policy stance rather than aggressively ease rates,” Pai said.
Pradeep Aggarwal, Founder and Chairman, Signature Global (India), said the MPC meeting comes at a time when the global economy continues to face heightened uncertainty due to geopolitical tensions, trade disruptions, and volatile commodity prices.
He further said the accommodative interest rate environment has encouraged many first-time as well as end-use homebuyers to enter the market.
“Maintaining this supportive policy stance will help sustain housing demand, strengthen allied industries, and continue contributing meaningfully to India’s economic growth,” Aggarwal said.
Mandar Pitale, Head, Financial Markets, SBM Bank (India) said that current growth-inflation dynamics point towards risks to growth with a manageable inflation trajectory in the immediate future.
“This coupled with elevated global uncertainties, may result in MPC not considering the rate hike option in a hurry during the forthcoming MPC meeting in August,” he said.
Shrikant Goyal, Co-Founder, Getfive, said while inflation has inched up in recent months, it remains within the RBI’s manageable range.
“Thus, we expect the central bank to maintain the status quo on the policy rate front, which will go a long way in supporting the MSME sector in general and the broader economy as a whole,” he said.