The Reserve Bank of India’s Monetary Policy Committee (MPC) begins its three-day meeting on Tuesday amid growing inflation concerns, with a majority of economists and treasury heads expecting the central bank to keep interest rates unchanged this week while signalling a tighter stance later in the financial year, PTI reported.The six-member MPC, headed by RBI Governor Sanjay Malhotra, will meet from June 3 to June 5, with the policy decision scheduled to be announced on Friday.According to a PTI poll, 11 respondents expect the RBI to maintain the repo rate at current levels in the June policy review, while four foresee a 25-basis-point increase.The RBI has already reduced the benchmark repo rate by 125 basis points since last year to support economic growth. Economists believe policymakers may now prefer to assess the impact of rising fuel prices and geopolitical developments before taking the next policy step.“Pause because headline inflation remains below the 4 per cent target. The RBI has policy space to wait to see the second round impact on inflation from the fuel price hike. Flexible inflation target provides policy space to look through the first round impact of supply side shocks,” said Gaura Sengupta, economist at IDFC First Bank.While most economists expect a pause this week, the broader consensus points to higher interest rates later in FY27 as inflationary pressures build.Many respondents expect at least two rate hikes during the current financial year, while some see scope for additional tightening if commodity prices and imported inflation remain elevated.“We now think the MPC is likely to begin hiking from the June meeting, as domestic inflation risks are rising, alongside higher global yields; a few Asian central banks have already delivered surprise hikes. Our FY27 rate hike forecasts face upside risk of 0.25-0.50 per cent if pressures on commodity prices, rupee sustain,” said Anubhuti Sahay, Head, India Economic Research at Standard Chartered Bank India.The survey also found broad agreement that the RBI could raise its inflation forecast for FY27 in the upcoming policy review.Most respondents expect the central bank to revise its consumer price inflation projection upward to around 4.9-5.5 per cent, reflecting higher global crude oil prices and the recent increase in domestic petrol and diesel rates.Icra Chief Economist Aditi Nayar said inflation could move closer to 5 per cent in June as higher fuel prices begin feeding into consumer prices, although the extent of second-round effects remains uncertain.Alongside higher inflation projections, economists expect the RBI to marginally lower its FY27 GDP growth forecast to account for risks arising from elevated energy prices and continuing geopolitical tensions in West Asia.While any downgrade is expected to be modest, analysts said persistently high crude oil prices and weaker global demand conditions could weigh on economic activity.On liquidity, most respondents do not expect any major policy measures this week. However, they believe the RBI will reiterate its commitment to ensuring adequate liquidity and maintaining stability in money markets.“We expect measures to support liquidity and to keep money market rates aligned to the corridor and review of admin and regulatory measures for the rupee,” said Sachchidanand Shukla, Group Chief Economist at Larsen & Toubro.Market participants will also watch for any comments on the rupee, foreign exchange management and the RBI’s assessment of inflation risks stemming from fuel prices, weather conditions and the evolving situation in West Asia.
