The Reserve Bank of India is expected to maintain its wait-and-watch stance and keep the repo rate at 5.25 per cent in coming meetings as the US-Iran peace agreement reduces geopolitical uncertainty, while it monitors food and fuel price pass-through before acting, BofA Securities said in a note on the June MPC minutes.
BofA Securities said the uncertainty clouding the outlook has eased since the June meeting following the conclusion of the US-Iran peace agreement. This gives the MPC more room to stay data-dependent rather than react to volatile energy prices. RBI Governor Malhotra highlighted that inflation risks have risen due to food and fuel shocks, but with underlying inflation still contained, a wait-and-watch stance remains appropriate.
The brokerage expects the RBI to continue tracking monsoon outcomes and crude trends before considering any change in policy direction.
BofA Securities noted the RBI unanimously maintained the repo rate at 5.25 per cent and retained its neutral policy stance amid a volatile geopolitical backdrop. The central bank also lowered its FY27 growth forecast by 30bps to 6.6 per cent YoY while raising its inflation projection by 50bps to 5.1 per cent, citing weather-related risks. “The minutes showed unanimous recognition of the volatile economic backdrop and rising inflation risks. However, members noted that underlying inflation has remained contained, with no immediate concerns on second-round effects, making status quo on policy action and a data-dependent approach an appropriate course of action,” BofA Securities said.
Internal members leaned toward caution on premature tightening. Gupta viewed the rise in inflation largely as a supply-side phenomenon driven by energy and imported cost pressures, arguing against a premature policy response. Indranil Bhattacharyya noted that wholesale price pressures have increased, but the transmission to consumer inflation remains incomplete, warranting a cautious and data-dependent approach.
External members echoed the growth-support view. Singh acknowledged the worsening inflation outlook due to external shocks but stressed the need to support growth given still-benign core inflation. Saugata Bhattacharya flagged concern that elevated crude prices could fuel second-round inflationary pressures and further dampen growth, though he did not see a case for immediate tightening. Nagesh Kumar emphasised that while the West Asia conflict complicated the growth-inflation trade-off, India’s strong macroeconomic fundamentals and policy buffers leave it well-positioned to withstand the shock, voting for the status quo.
BofA Securities’ dove-hawk meter for June showed the MPC in a neutral, moderately dovish-to-neutral zone with no shift toward hawkishness from April.