RBI Likely To Keep Repo Rate Unchanged In June Policy Review, Economists Expect Hikes Later In FY27

New Delhi, June 02: The Reserve Bank of India (RBI) is expected to maintain the benchmark repo rate in the upcoming June monetary policy review, according to a poll of economists and treasury heads.

While most experts believe the central bank may pause for now, many also expect policy tightening to return later in FY27 amid rising inflation concerns linked to fuel prices and global uncertainties.

Majority Expect Status Quo In June Policy

Out of the economists and treasury heads surveyed, 11 respondents expect the RBI’s Monetary Policy Committee (MPC) to keep rates unchanged, while four respondents anticipate a 0.25 per cent rate hike.

The RBI’s Monetary Policy Committee is scheduled to meet between June 3 and June 5, with the policy decision set to be announced on Friday.

The central bank has already reduced the repo rate by 1.25 per cent since last year to support economic growth.

Economists believe the RBI may prefer to wait and assess the impact of rising fuel prices and geopolitical tensions before making further policy changes.

Inflation Still Below RBI’s Target Range

Gaura Sengupta, economist at IDFC First Bank, said headline inflation currently remains below the RBI’s 4 per cent target, giving the central bank room to pause.

She noted that the RBI may choose to observe the second-round effects of fuel price increases before tightening policy further.

According to economists, India’s flexible inflation targeting framework allows the central bank to temporarily look through supply-side shocks before reacting aggressively.

Economists See Rate Hikes Returning In FY27

Although a pause is expected in June, most respondents believe the RBI could resume rate hikes later in FY27 as inflationary pressures build.

Several economists expect at least two rate hikes during the fiscal year, while some foresee even more increases if commodity prices and inflation continue rising.

Anubhuti Sahay, Head of India Economic Research at Standard Chartered Bank India, said domestic inflation risks and rising global bond yields are increasing pressure on central banks globally.

She added that continued stress on commodity prices and the rupee could push the RBI toward additional tightening measures.

RBI Expected To Raise Inflation Forecast

The PTI poll showed broad consensus that the RBI may revise its FY27 inflation projections upward in the upcoming policy review.

Most respondents expect consumer inflation estimates to rise to around 4.9 per cent to 5.5 per cent due to increasing crude oil prices and recent hikes in petrol and diesel prices.

ICRA Chief Economist Aditi Nayar said inflation could climb close to 5 per cent in June as higher fuel prices gradually pass through to consumers.

However, economists also noted that the extent of long-term inflationary impact remains uncertain.

Growth Forecast May See Slight Cut

Along with higher inflation projections, economists believe the RBI could slightly lower its FY27 GDP growth forecast.

Higher energy prices, geopolitical uncertainty in West Asia and weak global demand conditions are expected to create pressure on economic growth.

However, most respondents expect any downgrade to remain modest for now.

RBI Likely To Maintain Liquidity Support

On liquidity management, most economists do not expect any major announcement in the June policy.

However, respondents believe the RBI will continue reiterating its commitment to maintaining adequate liquidity in the banking system and keeping money market rates aligned with the policy corridor.

Some economists also expect the central bank to review regulatory measures related to the rupee and foreign exchange markets while ensuring orderly market conditions.

Sachchidanand Shukla, Group Chief Economist at Larsen & Toubro, said the RBI may continue taking steps to support liquidity and stabilise money markets.

The upcoming policy review is now being closely watched by investors, businesses and markets for signals on how the RBI plans to balance inflation risks with growth concerns in FY27.