The RBI noted that the prolonged conflict in West Asia has increased risks to both global growth and inflation. Volatile energy markets, falling crude inventories and rising commodity prices have prompted major central banks to adopt a more cautious approach, with advanced economies expected to lean towards tighter monetary policies.

On the domestic front, economic activity has remained resilient, supported by steady private consumption, sustained investment momentum, robust services exports and strong merchandise export growth in April 2026. However, higher freight and insurance costs, coupled with geopolitical uncertainties, are beginning to weigh on the economy. The central bank also flagged concerns over a deficient south-west monsoon, though various government initiatives are expected to help mitigate the impact on agriculture and rural demand.

Taking these factors into account, the RBI revised its FY27 real GDP growth forecast to 6.6% from 6.9% projected earlier. Growth is now estimated at 6.6% in Q1, 6.3% in Q2, 6.5% in Q3 and 6.8% in Q4. The central bank said prolonged supply chain disruptions, volatility in global financial markets and weather-related shocks remain key downside risks to growth.

CPI inflation for FY27 has been projected at 5.1%, compared with the earlier estimate of 4.6%. Quarterly inflation is expected at 4.2% in Q1, 5.1% in Q2, 5.9% in Q3 and 5.4% in Q4, while core inflation is projected at 4.7% for the year.

The RBI highlighted that elevated energy prices, global supply constraints, a weaker monsoon outlook and the risk of El Ni'o have increased inflation uncertainties. Given these evolving risks, the MPC decided that maintaining the current policy rate and stance would be appropriate until greater clarity emerges.

The minutes of the MPC meeting will be published on 19 June 2026. The next MPC meeting is scheduled for 3 to 5 August 2026.

Following the policy announcement, the Nifty Bank index rose 0.09% to 54,359.30, while the Nifty 50 slipped 0.13% to 23,386.30. IndusInd Bank led the gainers, rising 1.47%, followed by AU Small Finance Bank (1.01%), Punjab National Bank (0.83%), Canara Bank (0.50%), Bank of Baroda (0.42%), Yes Bank (0.35%), Axis Bank (0.30%) and ICICI Bank (0.22%).

Among the laggards, Federal Bank declined 0.98%, Kotak Mahindra Bank fell 0.50%, HDFC Bank shed 0.17% and State Bank of India slipped 0.08%.

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