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Informist, Thursday, Apr. 2, 2026

 

By Shubham Rana

 

NEW DELHI – The Reserve Bank of India's Monetary Policy Committee is widely expected to keep interest rates on hold next week. The focus instead will be on the central bank's commentary, growth and inflation projections, and regulatory measures as the rate-setting panel meets for the first time since the US-Israel combine attacked Iran.

 

All 15 economists and market participants polled by Informist said the Monetary Policy Committee will hold the repo rate at 5.25% at the end of the three-day meeting Wednesday. The committee is also widely expected to continue with the neutral stance.

 

The committee left the repo rate unchanged at 5.25% in February, after lowering it by 125 basis points in 2025, the largest cumulative easing in a calendar year since 2019.

 

"A limited inflationary impact from the surge in energy prices so far should enable the Reserve Bank of India to keep the repo rate on hold at 5.25% at the conclusion of the MPC meeting on Wednesday," Shilan Shah, an economist at Capital Economics, said in a report. "But the pressure to tighten policy over the coming weeks and months will build if the Middle East conflict intensifies and in particular if the rupee comes under further downward pressure."

 

The US-Israel war on Iran has led to a surge in energy prices and disrupted supply of oil and gas, raising expectations of higher inflation in India. The war has also put pressure on the Indian rupee, which has declined nearly 2% since the start of the conflict on Feb. 28.

 

"When external shocks such as high oil prices threaten to widen the current account deficit, a higher interest rate does little to ease exchange rate pressure," economists at ANZ Banking Group said in a report. "Against this backdrop, we believe the MPC can afford to maintain a neutral stance for now, buying time to assess how the situation evolves amid ongoing Middle East uncertainty."

 

Markets will focus more on the commentary by RBI Governor Sanjay Malhotra and other central bank officials, to gauge the Mint Street's response to the impact of the war in West Asia. "Communication will be the first line of defence to ensure that domestic financial conditions do not tighten further," IDFC FIRST Bank Chief Economist Gaura Sen Gupta said in a report. "As this is a supply-side shock, monetary policy--which operates largely through the demand channel--is not the appropriate policy tool. Instead, fiscal policy is better suited to dealing with supply-side challenges."

 

The focus will also be on the RBI's growth and inflation projections, poll respondents said. The central bank deferred giving growth and inflation projections for 2026-27 (Apr-Mar) in February, citing the impact of the new GDP and CPI series released later that month.

 

Latest government data based on the new CPI series shows retail inflation was 3.21% in February, below the RBI's 4% target. India's GDP, meanwhile, grew 7.8% in the December quarter and is seen rising 7.6% in FY26, according to the government's second advance estimate.

 

Economists have raised their inflation forecasts for FY27 since the start of the war, while they have slashed growth projections. They expect inflation to average 4.5-5.0% this financial year, while growth is seen around 6.5-7.0%. A prolonged war in West Asia will only increase price pressures and put stress on economic activity, poll respondents said.

 

The following are the expectations of respondents from the Apr. 6–8 meeting of the Monetary Policy Committee:

 

ORGANISATION	APRIL MPC MEET EXPECTATION
ANZ Banking Group	Status quo
Bank of Baroda	Status quo
Barclays	Status quo
Canara Bank	Status quo
Capital Economics	Status quo
CareEdge Ratings	Status quo
HDFC Bank	Status quo
HSBC	Status quo
ICICI Bank	Status quo
IDFC FIRST Bank	Status quo
Industrial and Commercial Bank of China	Status quo
MUFG Bank	Status quo
Societe Generale	Status quo
Tamilnad Mercantile Bank	Status quo
Union Bank of India	Status quo

 

End

 

Edited by Tanima Banerjee

 

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