Against a backdrop of rising global risks, the Reserve Bank of India has started its 3-day Monetary Policy Committee (MPC) meeting to decide on the first bi-monthly policy of the fiscal year.
The 6-member panel, led by Governor Sanjay Malhotra, began deliberations on Monday. The final decision will be announced on Wednesday. Market expectations point to a status quo on the benchmark lending rate due to concerns over a possible rise in inflation linked to the ongoing West Asia crisis.
The RBI has already reduced rates by 125 basis points since February 2025, marking its most aggressive easing cycle since 2019. The last rate cut of 25 basis points came in December, followed by no change in the February meeting.
Experts believe the MPC will closely assess geopolitical tensions in West Asia, volatility in commodity prices, and sharp currency movements affecting the rupee. While retail inflation has moved closer to the RBI’s 4% target, rising global crude oil prices remain a key concern.
Crude prices have increased from around USD 60 per barrel to over USD 100 since the conflict began in late February. Estimates suggest that every USD 10 increase in crude prices can raise inflation by up to 0.60%. At the same time, the rupee has weakened by over 4% since the start of the conflict, adding pressure on import costs.
Analysts expect the central bank to maintain its neutral policy stance, allowing flexibility amid uncertain global conditions. The policy tone is likely to remain cautious, with emphasis on risks from volatile crude prices and geopolitical developments.
Other key factors under review include liquidity conditions, transmission of previous rate cuts, financial market stability, currency trends, capital flows, and bond market movements.
The government has tasked the RBI with maintaining retail inflation at 4%, with a tolerance band of 2% on either side, for the next 5 years until March 2031. India adopted the inflation-targeting framework in 2016, and it continues to guide monetary policy.
Latest data shows retail inflation rose to 3.21% in February from 2.74% in the previous month.
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