By Kimberley Kao
India’s central bank held rates steady on Friday, staying on pause as it gauges the impact of the Middle East conflict on the country’s currency and economy.
The Reserve Bank of India met against a backdrop of sharp rupee depreciation and acute economic risks, as the Iran crisis drives up energy prices, threatening to stoke inflation.
The RBI monetary committee voted unanimously to hold the policy repo rate at 5.25%, pausing for a third time after delivering a rate cut in December.
The RBI also voted to maintain a neutral monetary policy stance, signaling that it is continuing its wait-and-see approach as geopolitical uncertainty dominates the outlook.
Ahead of the decision, the rupee’s relentless slide had fueled speculation that the central bank could deliver its first interest-rate hike in three years.
The Indian currency has shed over 6% against the dollar so far in 2026, hammered by high oil prices that threaten to swell India’s import bill and spur inflation.
Last month, the RBI’s counterpart in Indonesia delivered a sizable 50-basis-point hike–its first in years–to support the rupiah, which, along with the rupee, is one of Asia’s worst-performing currencies so far this year.
However, a rate hike isn’t the only tool at the RBI’s disposal, and many analysts expect support for the rupee to take other forms. Economic indicators also point to still-robust growth and manageable inflation, giving policymakers room to watch how the impact of the Iran crisis unfolds.
Nine out of 11 economists surveyed by The Wall Street Journal had expected the RBI to stand pat on Friday, with two forecasting a 25-basis-point hike.
Write to Kimberley Kao at kimberley.kao@wsj.com
(END) Dow Jones Newswires
06-05-26 0101ET
