RBI set to hold rates on 5 June as war-driven inflation clouds outlook

India's central bank is poised to maintain its key Policy Repo Rate at 5.25% for the fifth consecutive meeting this Thursday, June 5th, defying some calls for easing amidst persistent economic headwinds. A Mint poll of economists confirms broad consensus, with the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) prioritizing the ongoing battle against stubborn, war-driven inflation over stimulating growth. This decision reflects a cautious "wait and watch" approach as global commodity price pressures continue to cloud the domestic outlook. The MPC hawkish stance is primarily a response to India's Consumer Price Index (CPI) remaining stubbornly above the RBI upper tolerance band, hovering around 6.7% in April, fueled by elevated crude oil prices and disrupted food supply chains. Protracted geopolitical conflicts in Eastern Europe and the Middle East continue to roil global energy and food markets, transmitting inflationary impulses directly into the Indian economy. While economic growth remains robust, Governor Shaktikanta Das has consistently signalled that durable price stability is paramount before any pivot to rate cuts. Looking ahead, all eyes will be on the MPC forward guidance, particularly regarding any timeline for potential rate cuts later in the year. Analysts anticipate a reiteration of data-dependent policy, with the RBI closely monitoring monsoon performance, global crude trajectories, and the geopolitical landscape. This continued hold ensures borrowing costs for commercial banks remain elevated, impacting credit growth and investment in the short term, as policymakers brace for sustained global volatility.