June 5 (Reuters) – The Reserve Bank of India held its policy rate steady on Friday and unveiled steps to pull in dollars, seeking to shore up an embattled rupee as the economy grapples with costly oil and foreign outflows.
COMMENTARY
KRISHNA BHIMAVARAPU, APAC ECONOMIST, STATE STREET INVESTMENT MANAGEMENT, BENGALURU
“We had expected the RBI to surprise with a hike today, given the tightening global backdrop and building inflation risks. The near-term challenge is timing. With the ECB and potentially the BOJ turning more hawkish in the coming weeks, external pressures on the rupee could build. Against this backdrop, the RBI’s revised growth and inflation forecasts, along with its guarded guidance, suggest it is preparing markets for a possible policy pivot as early as August.”
RAJEEV RADHAKRISHNAN, CIO, FIXED INCOME, SBI FUNDS MANAGEMENT, MUMBAI
“With inflation projections being revised upwards, policy rates are expected to trend higher over the coming months.”
NAVEEN KULKARNI, CHIEF INVESTMENT OFFICER, AXIS SECURITIES PMS, MUMBAI
“With the ambiguity around the West Asia war and no clear outcome on the ceasefire, volatile and elevated oil prices pose risks to the inflation estimates. Apart from the oil price shock, a possible subpar monsoon will also push inflation higher. Moreover, the rupee has depreciated sharply against the dollar and has been the worst-performing currency in the emerging markets. We believe these factors collectively would drive the regulator to reverse the rate cycle in the coming policy meetings.”
VIKRAM CHHABRA, SENIOR ECONOMIST, 360 ONE ASSET, MUMBAI
“A rate-led defence of the currency would have been an imprecise instrument at this juncture, and it made sense to look through any temporary spike in inflation while awaiting clarity on the monsoon outlook and the West Asia conflict.”
“Instead, the RBI addressed the root issue, announcing measures to improve capital flows. We expect pressure on the rupee to ease from here.”
“However, the growth-inflation trade-off is becoming more acute, and the RBI may need to weigh rate hikes in upcoming meetings.”
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
“The combination of a host of measures by the RBI and government announced today can help ease the pressure on the rupee and bridge some of the gap on the balance of payments.”
“The upward revision in the inflation forecast to 5.1% by 50 basis points by the MPC, with a recognition of further upside risks, raises the possibility of a rate hike as early as the October policy.”
ANUJ PURI, CHAIRMAN, ANAROCK, MUMBAI
“The ongoing war in the Middle East is having direct economic effects, including higher global oil prices and higher domestic construction costs. This sort of supply-side inflation is putting pressure on developers. Second, rising geopolitical uncertainty has led many potential Middle Eastern investors, who tend to put large amounts of money into Indian housing, to pause their buying. Constant borrowing costs mean that the market is not being punished by rising material costs and rising loan rates.”
SHISHIR BAIJAL, CHAIRMAN AND MD, KNIGHT FRANK INDIA, MUMBAI
“A pause in rates would help maintain favourable financing conditions for homebuyers and developers at a time when economic sentiment is being tested by global volatility. Stable borrowing costs are particularly important for sustaining demand in the residential market, where affordability remains a key consideration.”
MANORANJAN SHARMA, CHIEF ECONOMIST, INFOMERIC RATINGS, DELHI
“Essentially, the RBI’s June 2026 stance is not merely a pause; it is a strategic hold.”
“By staying the course, the RBI reinforces confidence in India’s macroeconomic framework while keeping its options open in the dynamic growth-inflation trade-off in an uncertain world.”
APOORVA JAVADEKAR, CHIEF ECONOMIST, MUTHOOT FINCORP, MUMBAI
“The RBI respected the lower growth forecasts by holding the repo (rate) constant, despite its own higher inflation forecast compared to last policy meeting.”
“We like that the RBI resisted the temptation to hike the rates to manage the Indian rupee, and instead is focusing on opening up of capital account.”
“We expect the RBI to hold in future unless actual inflation breaks materially above 5.5%.”
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“The central bank ticked all boxes to spur dollar inflows and stabilise the currency, signalling that all hands are on deck.”
“The hawkish pause underscored the central bank’s resolve to contain inflationary expectations and defend the currency, while recognising that tighter policy rates have historically only had a limited impact on exchange-rate dynamics.”
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
“We expect 50 basis points of rate hike beginning in October.”
“On the positive side, the measures taken by the RBI to attract capital would help ease pressure on the Indian rupee.”
GARIMA KAPOOR, DEPUTY HEAD OF RESEARCH & ECONOMIST, ELARA SECURITIES, MUMBAI
“As inflation concerns get entrenched, the case for rate hike develops towards second half of FY2027.”
ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURUGRAM
“The evolution of the monsoon rains, its impact on agri output and inflation, as well as any emerging signs of generalisation of inflationary pressures would drive the timing of the next rate action. As of now, we cannot rule out a rate hike in the third quarter of FY2027.”
SACHCHIDANAND SHUKLA, GROUP CHIEF ECONOMIST, LARSEN & TOUBRO, MUMBAI
“Good to see credible, data-dependent framework buying time to observe whether current shocks prove transitory or cumulative.”
“By resisting the allure of premature tightening and prioritising clear communication to anchor expectations, the RBI can chart a path toward genuine stability.”
(Reporting by Abhinav Parmar, Nishit Navin, Aleef Jahan C S, Surbhi Misra, Chandini Monnappa, Bharath Rajeswaran, Anuran Sadhu and Vivek Kumar M; Compiled by Dhanya Skariachan; Editing by Harikrishnan Nair)
