After holding rates in FY27's first MPC meet, what will RBI do next? Here's what economists say
The RBI will have a tight rope walk between inflation and growth amid the global uncertainty fuelled by the West Asia conflict, economists say.
- Apr 8, 2026,
- Updated Apr 8, 2026 9:38 PM IST
The Reserve Bank of India's monetary policy committee on April 8 left benchmark repo rate unchanged at 5.25 per cent. Several economists expect the central bank to maintain a pause for a long time as it assesses the growth as well as inflation uncertainty fuelled by the crisis in West Asia.
The key concern currently is how the conflict pans out, although for now Iran and US have announced a two weeks truce. Sustained high price of crude oil will eventually trickle down fuelling CPI (consumer price index) inflation, while the supply chain disruptions and gas shortages will hurt economic growth.
In this uncertainty, it was prudent to opt for a wait-and-watch approach and assess the situation as things pan out, say economists.
"Though a two-week ceasefire has been announced, there remains continuing uncertainty on the path and duration of the conflict, and its impact on the domestic economy. Given this uncertain scenario, RBI opted a wait and watch approach rather than signalling a definitive policy path – retaining optionality and flexibility to future rate decisions, " noted HDFC Bank economists Sakshi Gupta and Deepthi Mathew.
They expect the RBI will leave interest rates unchanged through the current financial year ending March 2027.
HSBC economists Aayushi Chaudhary and Pranjul Bhandari also believe RBI will keep interest rates on hold through calendar 2026.
"Our assessment suggests that if oil averages below $100 per barrel, inflation should stay under 6 per cent (assuming normal rains or a moderate El Niño). If oil averages above $100 per barrel, inflation would likely breach 6 per cent and could prompt rate hikes - though that isn't our base case, " they said.
The RBI slashed the repo rate by 125 basis points through 2025. The conflict in West Asia has clearly extinguished any chances of more rate cuts. Rather, people have now started asking will the RBI hike rates should sustained high oil prices over several months leads to inflation shooting up more than expected. But, equally, the central bank will also be vary of growth slowing due to the supply chain disruptions and inflation eventually hurting demand.
As Indranil Pan, chief economist at Yes Bank put it, it's going to be a "delicate policy trade-off of keeping inflation pressures in check yet supporting growth" through 2026-27.
"Given the inflation trajectory drawn out by the RBI over the quarters of FY27 and hoping that there are no significant downsides to the growth, the chances of any incremental rate cuts have moved close to zero. Rate hikes are also probably some distance away, " said Pan.
ALSO READ: World Bank sees India growth at 6.6% in FY27, flags inflation risk from energy prices
Rumki Majumdar, economist at Deloitte India said that inflation will be a concern to watch out for, as commodity prices may remain elevated even after the conflict subsides.
" While recent easing in oil prices has offered some temporary relief, the broader risk profile remains tilted to the upside," said Majumdar.
The Reserve Bank of India's monetary policy committee on April 8 left benchmark repo rate unchanged at 5.25 per cent. Several economists expect the central bank to maintain a pause for a long time as it assesses the growth as well as inflation uncertainty fuelled by the crisis in West Asia.
The key concern currently is how the conflict pans out, although for now Iran and US have announced a two weeks truce. Sustained high price of crude oil will eventually trickle down fuelling CPI (consumer price index) inflation, while the supply chain disruptions and gas shortages will hurt economic growth.
In this uncertainty, it was prudent to opt for a wait-and-watch approach and assess the situation as things pan out, say economists.
"Though a two-week ceasefire has been announced, there remains continuing uncertainty on the path and duration of the conflict, and its impact on the domestic economy. Given this uncertain scenario, RBI opted a wait and watch approach rather than signalling a definitive policy path – retaining optionality and flexibility to future rate decisions, " noted HDFC Bank economists Sakshi Gupta and Deepthi Mathew.
They expect the RBI will leave interest rates unchanged through the current financial year ending March 2027.
HSBC economists Aayushi Chaudhary and Pranjul Bhandari also believe RBI will keep interest rates on hold through calendar 2026.
"Our assessment suggests that if oil averages below $100 per barrel, inflation should stay under 6 per cent (assuming normal rains or a moderate El Niño). If oil averages above $100 per barrel, inflation would likely breach 6 per cent and could prompt rate hikes - though that isn't our base case, " they said.
The RBI slashed the repo rate by 125 basis points through 2025. The conflict in West Asia has clearly extinguished any chances of more rate cuts. Rather, people have now started asking will the RBI hike rates should sustained high oil prices over several months leads to inflation shooting up more than expected. But, equally, the central bank will also be vary of growth slowing due to the supply chain disruptions and inflation eventually hurting demand.
As Indranil Pan, chief economist at Yes Bank put it, it's going to be a "delicate policy trade-off of keeping inflation pressures in check yet supporting growth" through 2026-27.
"Given the inflation trajectory drawn out by the RBI over the quarters of FY27 and hoping that there are no significant downsides to the growth, the chances of any incremental rate cuts have moved close to zero. Rate hikes are also probably some distance away, " said Pan.
ALSO READ: World Bank sees India growth at 6.6% in FY27, flags inflation risk from energy prices
Rumki Majumdar, economist at Deloitte India said that inflation will be a concern to watch out for, as commodity prices may remain elevated even after the conflict subsides.
" While recent easing in oil prices has offered some temporary relief, the broader risk profile remains tilted to the upside," said Majumdar.