RBI likely to keep repo rate unchanged in June policy meet: SBI report

India's central bank is poised to maintain its benchmark Repo Rate in June, as suggested by an SBI Research report, signaling a cautious approach amidst a complex economic landscape. The Reserve Bank of India Monetary Policy Committee faces a tightrope walk, balancing robust domestic growth with persistent inflationary pressures and a depreciating rupee. The rationale for holding rates stems from a projected FY27 Consumer Price Index (CPI) inflation of 5% – within the RBI target band but leaning towards the upper end – and an estimated FY26 Gross Domestic Product (GDP) growth of 7.5%. However, geopolitical uncertainties, particularly escalating tensions in West Asia, threaten to keep Crude Oil Prices above $90, fueling imported inflation. This external volatility, coupled with Rupee Depreciation despite strong fundamentals, puts pressure on the RBI for 'augmented intervention' and a comprehensive Balance of Payments (BOP) Package. While the MPC is likely to opt for a data-dependent 'wait and watch' strategy, the report hints at potential alternative tools like 'Operation Twist' to manage market microstructure and calls for a potential fiscal response, such as reducing Excise Duty on fuel. The market will be closely watching the RBI guidance for insights into its currency management strategy and its tolerance for imported inflation, as geopolitical risks show no signs of abating.