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Informist, Monday, Jun. 22, 2026

 

NEW DELHI – With the global picture improving significantly after an interim peace deal between the US and Iran, economists expect the Reserve Bank of India's Monetary Policy Committee to delay hiking the repo rate.

 

After the Jun. 5 policy review, where the Monetary Policy Committee left the repo rate unchanged at 5.25%, most economists had expected the rate-setting panel to start raising the repo rate in Oct-Dec. Some even expected the tightening cycle to begin in August, because of growing inflationary risks from higher energy and food prices. However, now most expect the rate-setting panel to start hiking the repo rate in Oct-Mar, with some seeing no rate hike in 2026 at all. 

 

Global crude oil prices have eased sharply after an interim peace deal between the US and Iran on Jun. 15. Brent crude prices jumped to a near four-year high of $122 per barrel in April as the war in West Asia intensified. Brent crude oil prices have come down to below $80 per barrel after the announcement of the interim peace deal.   

 

"Given the recent rapprochement between the US and Iran and the fall in crude oil prices since the June meeting, some of the commentary of the MPC may be somewhat obsolete, and a more relaxed MPC may convene for the August meeting," Nomura said in a note, adding that it expects the Monetary Policy Committee to stay on hold for the rest of the year. 

 

State Bank of India's Group Chief Economic Adviser Soumya Kanti Ghosh also said that rate hike by the Monetary Policy Committee is unwarranted at this juncture. SBI expects average crude oil price for Indian basket to be at around $85 per barrel, which will lead to savings of $25 billion in oil import bill. 

 

YES Bank said in a note that if oil prices sustain around $70-$75 per barrel, with the government not undertaking any further pass-through, the need for the RBI to move into a hiking cycle reduces significantly. "Given current understanding, rate hikes are likely to be pushed out into H2 FY27 after having assessed the impact on food prices of the weak SW (South West) monsoon and its second order impact," it added.

 

Economists expect the RBI to revise its inflation projections lower if oil prices average around $80-$85 per barrel. The central bank in its June policy decision raised its CPI inflation projection for FY27 by 50 bps to 5.1%, because of higher energy prices and the expectation of below-normal monsoon rains.

 

Economists at Barclays said that only if inflation shows signs of sustained second-round effects, such as cascading fuel costs into broader transportation fare hikes or slower-than-expected monsoon rainfall that translates into a food supply and consequent price shock, would they be worried about an earlier than envisaged rate hike. Barclays expects a gradual 50 bps hiking cycle in Jan-Mar. 

 

The foreign capital inflow measures implemented in the June policy also substantially reduce the need for higher rates to counter the rupee's depreciation, economists said. RBI earlier this month announced a slew of measures to attract foreign inflows and support the rupee. Among the various measures was a facility to cover the full hedging costs for banks raising fresh three- to five-year FCNR(B) deposits till Sept. 30 and a concessional foreign exchange swap till Sept. 30 to incentivise external commercial borrowings by public sector undertakings. The rupee has appreciated over 1% against the dollar since the announcement of these measures. End

 

US$1 = INR 94.68

 

Reported by Pratiksha

Edited by Akul Nishant Akhoury

 

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