Overview
- The three-day Monetary Policy Committee meeting begins Monday, August 3, and most economists and market polls expect the RBI to keep the repo rate at 5.25 percent.
- Officials are likely to keep the policy stance neutral while signalling greater caution on inflation by warning that future rate increases are possible if price pressures persist.
- SBI Research projects Q1 FY27 growth above 7 percent and expects consumer inflation to stay above 5 percent for the next two quarters, strengthening the case for a cautious approach.
- Instead of raising rates now, the RBI has used targeted foreign exchange and liquidity measures that attracted roughly $35–40 billion of inflows and rebuilt reserves by about $12.5 billion.
- Market interest-rate swaps price roughly 75 basis points of tightening over the next 12 months if inflation stays high, which could push up bond yields and borrowing costs for households and businesses.