RBI Policy Outlook: Markets Await MPC Guidance on Inflation, Growth and Rupee

Most economists and market participants expect the Reserve Bank of India (RBI) to keep the repo rate unchanged at the upcoming Monetary Policy Committee (MPC) meeting. However, the MPC policy statement scheduled for June 5 will be closely monitored by investors and analysts for signals regarding the central bank’s future monetary policy direction and economic outlook.

The ongoing conflict in West Asia, now nearing 100 days, has increased uncertainty across global markets. Persistent geopolitical tensions, elevated crude oil prices, and potential supply chain disruptions could influence the RBI’s assessment of both economic growth and inflation. As a result, the central bank may need to revisit its macroeconomic projections in light of evolving global developments.

Another key area of focus is the Indian rupee, which has depreciated by more than 6% in 2026, making it one of its weakest performances in the past decade. This sharp decline has raised expectations that the RBI may consider measures to manage exchange rate volatility. Market participants are also keenly watching whether the central bank will act on the RBI Governor’s earlier observation that the rupee appears undervalued.

According to Madan Sabnavis, Chief Economist at Bank of Baroda, no immediate change is expected in either the repo rate or the overall policy stance. However, he believes the RBI’s communication could remain cautious while adopting a slightly hawkish tone. He also expects the central bank to raise its inflation forecast closer to 5% and revise its GDP growth forecast downward from 6.9% to around 6.5%. While no specific announcement related to the foreign exchange market is anticipated, the RBI is expected to provide further insights into recent developments affecting the rupee, inflation, and the broader economy.