Mumbai : The Reserve Bank of India (RBI) is expected to leave its key repo rate unchanged at the conclusion of its upcoming Monetary Policy Committee (MPC) meeting scheduled for Friday 6, as persistent volatility in the currency markets and sustained pressure on government bond yields complicate the central bank’s policy outlook, according to a report by State Bank of India (SBI).
The SBI analysis suggests that despite previous rounds of rate easing, the RBI will maintain the status quo on the repo rate in its policy announcement. Officials have weighed a range of domestic and global uncertainties, including uneven inflation signals and external economic risks, before reaching the cautious conclusion.
One of the challenges highlighted in the report is the persistent hardening of government bond yields, which has continued even after previous policy‑rate cuts. This dynamic, combined with currency fluctuations in the rupee, could dampen the effectiveness of monetary stimulus and influence broader credit conditions. SBI noted that choices around the eligible securities for Open Market Operations (OMOs) might also affect the transmission of policy actions.
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Since the RBI’s last MPC meeting, significant international developments including newly finalised EU‑India and US‑India trade agreements have driven tariffs on Indian goods down, improving export competitiveness and trade prospects. However, SBI cautioned that ongoing global economic uncertainty and complex commodity price movements add layers of risk to the outlook.
On the domestic front, the rupee has shown volatility, dipping against the US dollar over recent months before recovering following the India‑US trade deal. While inflation remains manageable, small shifts in CPI projections could influence future policy decisions, particularly if food prices rise.
Given these mixed signals, SBI’s report concluded that the RBI will take a prudent, cautious stance, opting to keep monetary policy settings unchanged rather than risk premature adjustments. The MPC’s full review and final policy announcement are expected at the end of its three‑day meeting.
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