RBI unlikely to raise interest rates soon amid declining crude oil prices, say experts

Reserve Bank of India (RBI) is not expected to raise its policy rate in the near term, according to Piramal Group Chief Economist Debopam Chaudhuri. The RBI Monetary Policy Committee (MPC) is set to convene from August 3 to August 5, 2026, to assess key policy rates.

“I do not anticipate the RBI increasing the policy rate anytime soon,” Chaudhuri remarked, pointing to declining crude oil prices and reduced energy‑related risks as the main reasons for the central bank to hold its current monetary stance. In an interview with ANI he added, “Crude prices have fallen, so the immediate threat of persistently high energy costs has largely diminished,” noting that the RBI would likely adopt a “wait and watch” approach concerning monsoon developments.

The Reserve Bank of India’s Monetary Policy Committee (MPC), in its session held from June 3 to 5, 2026, unanimously decided to keep the policy repo rate unchanged at 5.25 percent and maintain a neutral policy stance, citing heightened uncertainty stemming from the prolonged West Asia conflict, elevated global energy prices, supply‑chain disruptions, and concerns about a deficient monsoon.

The MPC projected India’s real GDP growth for FY 2026‑27 at 6.6 percent while revising Consumer Price Inflation (CPI) upward to 5.1 percent, with inflation expected to peak at 5.9 percent in the third quarter. Although headline inflation stayed below the target during March and April 2026, members warned about possible second‑round effects from rising fuel and input costs.

The Committee concluded that, despite inflationary pressures, the prevailing uncertainty justified a wait‑and‑watch, data‑dependent strategy rather than immediate tightening. All six members voted in favor of holding the existing repo rate and neutral stance. Chaudhuri expressed confidence in India’s long‑term economic outlook, arguing that robust domestic demand continues to shield the economy from global volatilities.

“Looking at a longer horizon, India is clearly in a sweet spot, chiefly because of our rapidly expanding middle‑income segment, which is growing at a swift pace… From a long‑term viewpoint, achieving economic growth in the 7 percent to 7.5 percent range should be feasible,” he stated.

According to Chaudhuri, India’s fast‑growing middle‑income cohort and youthful population remain the pillars of sustained growth, although successive global crises could cause a temporary slowdown around 2027. On commodities, he observed that gold prices are correcting as central bank purchases have slowed and geopolitical tensions in West Asia have eased.

He added that lower crude oil prices are delivering substantial relief to the Indian economy. “Our crude import bill is set to ease considerably… The worries about a sharply rising current account deficit have largely dissipated,” Chaudhuri said, adding that he expects the rupee to stabilise around its historical average depreciation of 3 percent to 3.5 percent. Chaudhuri’s comments followed the US Federal Reserve’s decision to keep its repo rate steady between 3.50 percent and 3.75 percent.

Sharing a similar view on the currency market, Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, said the rupee’s ascent to a six‑week high of 94.33 against the dollar was bolstered by both lower oil prices and strong capital inflows after the US‑Iran peace deal.

“The rupee is being supported from two directions simultaneously — cheaper oil on the trade side and a strong, policy‑driven wave of dollar inflows through the FCNR(B), ECB, and debt channels on the capital side,” Banerjee told ANI. Banerjee also linked the recent decline in gold and silver prices to a hawkish US Federal Reserve stance, but emphasized that softer commodity prices ultimately benefit India. “With oil and gold falling together, India’s two largest import bills are shrinking at once — which is doubly advantageous for the trade deficit and the rupee,” he said.

Published on June 22, 2026