RBI Monetary Policy Committee Meets Amid Rising Inflation Concerns

Reserve Bank of India's Monetary Policy Committee to Announce Decision on Friday

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) is set to announce its decision on Friday, 5 June, following a three-day policy meeting that commenced on Wednesday, 3 June. The committee's decision comes amid a surge in crude oil prices and intensifying geopolitical tensions in West Asia, which have introduced additional uncertainty into the policy outlook.

The RBI recently reduced the repo rate by a total of 125 basis points beginning in February 2025 as part of its monetary easing measures. Since then, the central bank has kept rates unchanged in its February and April 2026 policy reviews. The Indian rupee has witnessed sharp volatility and recently weakened to nearly 97 to a dollar before recovering some of the lost ground.

Market experts are anticipating the central bank to keep the repo rate unchanged in the upcoming June meeting. DSP Mutual Fund notes that the RBI is unlikely to announce a rate hike; instead, it is likely to follow a step-by-step sequence before pulling the trigger on rates to defend the currency. The firm further noted that the RBI has been continuously providing Variable Rate Repos (VRRs) and has also announced a buy-sell swap. This indicates that the RBI is currently not signalling an immediate defensive interest rate hike.

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Brokerage firm Emkay Global highlighted that if rates are raised, the objective would be to curb domestic demand pressures or anchor inflation expectations rather than defend the currency. Abhinav Tiwari, Research Analyst at Bonanza, said that the RBI is expected to hold rates steady in June; a more hawkish stance may emerge going forward.

The central bank's decision to maintain status quo will likely have a positive impact on the Indian stock market, according to Tiwari. On the other hand, a June hike would likely trigger short-term selling in rate-sensitive sectors like banks, autos, and real estate, while bond yields rise.

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The RBI's decision is likely to be closely watched by investors and market experts, who are anticipating the central bank to manage FX volatility through reserves and regulatory measures, while potentially exploring incentives to boost USD inflows via external loans and other channels.