- The Reserve Bank of India's Monetary Policy Committee (MPC) will announce its decision at 10 am on August 5.
- A Reuters poll indicates that the central bank is expected to keep the repo rate unchanged at 5.25 percent.
- Retail inflation rose to 4.38 percent in June, crossing the RBI's 4 percent target for the first time in 17 months.
- Ahead of the decision, the BSE Sensex rose 491 points to 78,920 and the Nifty 50 gained 54 points to 24,669.
- Economists expect the RBI to retain its 6.6 percent FY27 GDP growth forecast, but views are divided on a potential 25-basis-point rate hike in October if crude prices rise sharply.
- In June, the RBI raised its FY27 inflation forecast to 5.1 percent from 4.6 percent and lowered its FY27 GDP growth forecast to 6.6 percent.
- Outstanding Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits crossed $60 billion at the end of July, up from $32.56 billion as of June 5.
The Reserve Bank of India's Monetary Policy Committee (MPC) is set to announce its decision on August 5, with expectations to maintain the repo rate at 5.25%.1
This decision comes as retail inflation rose to 4.38% in June, surpassing the RBI's target for the first time in 17 months.
Market analysts are closely monitoring the RBI's commentary on inflation, growth, and capital flows, particularly in light of geopolitical tensions and fluctuating crude oil prices.
Shishir Baijal, Chairman and Managing Director of Knight Frank India, stated, “We expect the MPC to maintain the policy rate at its current level, balancing growth with macroeconomic stability amid an evolving global environment.”
Prachi Kele, Lead Economist at PL Capital, added, “We expect MPC to adopt a cautious tone amid ongoing war-related uncertainties, while reiterating a data-dependent approach for future policy decisions.”
According to a Moneycontrol survey, 16 market participants anticipate the central bank will retain its neutral stance.
While inflation averaged around 4% during the April-June quarter, the RBI raised its FY27 inflation forecast to 5.1% from 4.6% in its June review.7
Most economists expect the GDP growth forecast to remain at 6.6%, supported by resilient domestic demand.
However, rising Brent crude prices, currently around $84 per barrel, could influence future policy decisions.
Some analysts predict a potential 25-basis-point rate hike in October if crude prices escalate.56
Overall, the MPC's decision will be pivotal in shaping market expectations and economic stability.
“Reuters' poll shows unanimous expectations for a pause, yet views diverge on an October 25-basis-point hike if Brent, now around $84 per barrel, surges again. FCNR(B) deposits crossed $60 billion at end-July, up from $32.56 billion on June 5, with SBI accounting for about $4.12 billion.”
Forbes India
