RBI set to keep interest rates unchanged as inflation risks persist

The Reserve Bank of India (RBI) is anticipated to keep interest rates unchanged during its upcoming bi-monthly monetary policy decision, scheduled for Wednesday at 10:00 AM IST (04:30 GMT). This decision comes amidst ongoing uncertainty due to the Middle East conflict. Analysts at Commerzbank predict the RBI will maintain its current policy stance, with the benchmark repurchase rate remaining at 5.25%.

Despite a 4.4% year-on-year (YoY) rise in the June Consumer Price Index (CPI), the RBI's target range of 2-6% was met, justifying the decision to remain on course. The bank is also expected to maintain its Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) rates at 5% and 5.5%, respectively. Of the 72 economists polled by Reuters, 68 expect the RBI to keep policy rates as they are.

The RBI has maintained these rates throughout the year, with a 25 basis points (bps) cut to 5.25% in the December 2025 meeting. Earlier, the RBI raised its inflation forecast for FY26-27 to 5.1% YoY, citing higher input prices and rising commercial LPG prices. RBI Governor Sanjay Malhotra emphasized the need to wait for clearer data, and the central bank will remain data-dependent.

Investors will closely monitor the RBI Governor's comments regarding inflation and the economic outlook. The bank's focus remains price stability, but policymakers do not perceive any signs of price pressures persisting. Analysts at Axis Bank expect the Monetary Policy Committee (MPC) to acknowledge risks of higher inflation and potential policy action, while maintaining a data-dependent approach.

Financial markets will also keenly observe the performance of Foreign Currency Non-resident (FCNR) deposits, aimed at increasing foreign inflows to bolster forex reserves.