New Delhi: The Reserve Bank of India’s Monetary Policy Committee (MPC) is likely to maintain a wait-and-watch approach amid elevated uncertainty, with falling crude oil prices and a stronger rupee expected to cushion inflation risks, a report said on Monday.
“Uncertainty is too high for immediate action. Hold now, stay neutral, wait for clarity and keep optionality open is the underlying message of the MPC minutes,” the report from SBI Research said.
The report highlighted that the monsoon poses the greatest near term uncertainty, with June 2026 at a 42 per cent deficit so far, marking the fifth driest month in 126 years, adding that a positive Indian Ocean Dipole may offer some relief.
A decline in crude oil prices and rupee appreciation could ease imported inflation and help keep consumer price index (CPI) inflation within the Reserve Bank of India’s target range.
RBI inflation expectation survey indicated cautiousness among Indian households regarding discretionary spending. With expectations significantly outpacing actual inflation, consumer confidence has softened, causing households to turn cautious on discretionary spending.
“We believe that to talk about rate hike is unwarranted at this juncture…In uncertain times, a good central bank should be cautious about false precision, forceful against high-cost tail risks, systematic enough to preserve credibility, flexible enough to adapt,” the report said.
The research firm said the sluggish monsoon is due to a weaker Somali jet over the Arabian Sea, but forecasts indicate the jet may strengthen in coming weeks, increasing moisture flows to India’s west coast.
It forecasted that average crude oil price for Indian basket is now expected at roughly $85/bbl which will lead to savings of $25 billion in Oil import bill against our previous estimate when oil price crossed $130/bbl.
(IANS)
