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Informist, Thursday, Jun. 4, 2026

MUMBAI – Following are the expectations of economists from the meeting of the Reserve Bank of India's Monetary Policy Committee, which began Wednesday. The committee's decision will be announced Friday.

GAURA SEN GUPTA, CHIEF ECONOMIST, IDFC FIRST BANK

The June policy will take place against the backdrop of inflation and growth concerns. The West Asia crisis seems no closer to a resolution, and global crude oil prices remain elevated. A rate hike at this juncture isn't warranted, as inflation remains within the target band. Moreover, in the coming quarters, the impact on domestic growth is expected to become more visible as higher energy prices affect both corporate margins and consumer demand. The overall tone of the policy is expected to remain cautious, with the RBI reiterating its willingness to act if there is a generalisation of price pressures.

The policy space to remain on pause is derived from the fact that the crisis comes at a time when there is excess capacity in the economy. This is reflected in the current account deficit remaining below 1% of GDP for the last three years and core-core CPI inflation staying below 4% for more than two years. Interest rate hikes should not be used as a currency defence, as that would require a sharp rise in rates to be effective and would be associated with significant growth costs.

HSBC GLOBAL INVESTMENT RESEARCH

On rate policy, we believe it's a close call, but the repo rate may be left unchanged at 5.25% on Jun. 5 since CPI inflation remains below target so far, financial conditions are tightening anyway, and the RBI may not want to give the impression that it is using rate hikes for FX defence. If it makes its oil price scenario of $95 per barrel in 2026-27 (Apr-Mar) as its base case, its inflation forecast will rise from 4.6% to 5%, adding a hawkish touch to the policy without rate action.

Eventually, if El Nio sets in, we think inflation could cross 6% for two to three quarters starting in September. Our inflation forecast is an above-consensus 5.6% in FY27. We forecast two rate hikes starting in Oct-Dec. We also forecast a below-consensus GDP growth of 6% in FY27, which may tie the RBI's hands from tightening more.

YES BANK

Policy challenges remain magnified even as the war situation gets better yet remains unresolved, thereby keeping the economy open to supply shocks. The pass-through from the WPI to retail inflation has just started in the form of increases in the pump-head prices of petrol and diesel, alongside increases in the prices of commercial LPG. Manufacturing input costs and farm input costs have sharply risen, and manufacturers have indicated a willingness to pass this on to the retail side.

Having said, as stated in the April MPC meeting, risks of policy missteps remain large, given significant moving pieces and a lack of clear understanding if the inflation risks are transitory or permanent. While every policy remains live, we see a very small probability of a rate and stance change in June, as the RBI buys time to assess the second-round impact of price rises. The probable timing of the start of a likely 75–100 basis point rate hike is August, once monsoon impact on food prices is also factored in.

EMKAY GLOBAL FINANCIAL SERVICES

We expect the MPC to hold rates steady this week, while signalling readiness to respond should inflation risks intensify and second-round pressures begin to emerge. While the percolation of the energy shock to the real sector is still unfolding, the RBI is likely to flag a cloudy Brent outlook amid a large drawdown in energy inventories and lingering geopolitical risks.

This, in conjunction with the rising risk of El Nio, could lead the RBI to raise its FY27 inflation forecast, while adding downside risks to growth. Importantly, given the recent rupee weakness, the RBI is likely to reiterate the clear delineation between monetary and FX policy under the inflation-targeting regime. Any future rate hike would be aimed at curbing domestic demand pressures or anchoring inflation expectations, rather than defending the rupee. FX volatility will continue to be managed through reserves and regulatory measures. We will watch for policy measures aimed at encouraging dollar inflows, including incentives for external borrowing and other capital flow channels. We do not expect the RBI to use rate hikes for FX management, given the MPC's inflation-targeting mandate. If rates are raised, the objective would be to curb domestic demand pressures or anchor inflation expectations rather than defend the rupee. The 2013 experience highlighted the limits of interest-rate defence. 

DIPANWITA MAZUMDAR, ECONOMIST, BANK OF BARODA

The most notable change since the last policy has been the hike in petrol and diesel prices, which was much anticipated. RBI's inflation projection is likely to incorporate the same. We expect the RBI's CPI projection for FY27 to be revised upward.

Another important development has been the volatility in the rupee. This does not fall under the ambit of monetary policy. We may expect status quo on rates as the impact on growth due to the crisis is still difficult to ascertain and, on the inflation front, an increasing trend is imminent. On stance, we expect the RBI to maintain it at neutral since it has the flexibility of responding to incoming data, as highlighted by the RBI in its previous policies.

NOMURA

Despite pressure to raise policy rates to defend FX and/or pre-emptively ward-off inflation risks, we expect the RBI's MPC to vote unanimously to keep repo rate on hold at 5.25% on 5 June. Three reasons why we expect policy rates to be on hold: the RBI is an orthodox inflation-targeting central bank, rate hikes are an ineffective tool for FX defence, and inflation is not yet a problem.

The RBI's economic projections are likely to see CPI inflation revised higher by 30 bps to 4.9% in FY27 and GDP growth ~10 bps lower to 6.8%. We expect the RBI's policy guidance to reflect a hawkish hold. There is a risk that its liquidity stance shifts from 'adequate' to 'neutral', while non-monetary measures to prevent the rupee depreciation and curb speculation are likely. We attach a 75% probability to our baseline of a repo rate on hold, a 20% probability of a pre-emptive 25 bps hike to ward off inflation risks and a 5% probability of a 50 bps hike.

ANZ BANKING GROUP

We think it is now essential for India's monetary policy to back the multipronged response to the balance of payment shock caused by global factors. Pre-emptive rate hikes (we expect one in June) keeping future inflation at the core will constitute a strong signal to financial markets that have repeatedly tested the exchange rate and term premium, tightening financial conditions ahead of any policy shift. We continue to factor depreciation bias for the rupee but expect the RBI will keep 'leaning against the wind' to ensure orderly weakening.

STANDARD CHARTERED BANK

We now think the Monetary Policy Committee is likely to begin hiking from the June meeting, as domestic inflation risks are rising alongside higher global yields; a few Asian central banks have already delivered surprise hikes. Our revised four quarters-ahead CPI inflation forecast is now at 5.1%, versus our prior forecast of 4.7% and last year's CPI of 2.1%.

While inflation would likely remain within the MPC's mandated 2–6% target range, with 4% as the medium-term target, the risk of persistent inflation is, in our view, likely to trigger a policy response. We expect 50 bps of hikes, split equally between June and August. However, if there is no hike in June, the repo rate could be hiked by 50 bps in August. We also see a risk of an additional 25–50 bps of hikes in FY27 if inflation turns out to be higher than we expect due to continued pressure from commodity prices and the rupee weakness.

DEUTSCHE BANK RESEARCH

We expect the RBI to maintain a pause in the Jun. 5 policy. Given the high degree of uncertainty and the two-sided risks to growth and inflation at this stage, the "neutral" monetary stance will also remain unchanged, in our view. As long as the RBI is not using rate hikes to defend the rupee, we expect the MPC to exercise patience, while maintaining vigilance on the forward-looking growth and inflation trajectory.

In our view, given the downside risks to growth, the MPC will likely wait to see how the Apr-Jun GDP data pans out before deciding on the need for rate hikes. The Apr-Jun GDP data will come out at the end of August and the next policy after that is in early October. By that time, the MPC will have a fair idea of the growth-inflation mix, monsoon progress, global oil price and geopolitics and the outlook on fiscal, balance of payments and rupee.

Our long-standing view has been that the terminal repo rate in this cycle is likely to be 6.25%, which we maintain. Assuming CPI inflation averages 5.0% in FY27, the repo rate, in our view, needs to be at least 100 bps higher at 6.25%, to have a positive real interest rate of 125 bps. However, we don't see any immediate need for rate hikes, as the markets seem to be pricing in at this stage.  End

US$1 = INR 95.79

Compiled by Pratiksha

Filed by Avishek Dutta

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