New Delhi, June 1 (IANS): The Reserve Bank of India’s Monetary Policy Committee is likely to maintain a wait-and-watch stance at its June meeting and hold rates unchanged amid rising inflationary pressures and external volatility, according to a report by CareEdge Ratings released on Monday. Inflationary concerns have intensified due to a projected below-normal monsoon and recent retail fuel price hikes, while a sharp rise in WPI inflation also raises the risk of a faster second-round pass-through to consumer prices, though the ratings agency noted that the current uptick in inflation is a supply shock and not demand-driven. The domestic growth outlook has also eased considerably as the economic impact of the prolonged conflict transmits through multiple channels, with both global and domestic bond yields rising and USD/INR weakening considerably since the onset of the conflict. The tone of the policy statement will be crucial, as the possibility of policy rate hikes towards the end of the year cannot be ruled out if inflationary pressure prolongs, the agency said.
The future trajectory of the policy rate will depend on the MPC’s assessment of evolving inflation dynamics and whether current price pressures are transient or become entrenched in household expectations, with rate hikes possible by CY26-end if conflict persists and inflation risks become entrenched. The real policy rate is expected to remain below its long-term average of 0.95 per cent for three quarters before converging to this level by Q1 FY28. CareEdge projected FY27 GDP growth at 6.7 per cent assuming crude oil averaging $90 per barrel, though prolonged conflict and oil prices around $110 per barrel could lower growth closer to 6 per cent. In a separate report, the firm said its CareEdge Debt Quality Index reached 97.15 in April 2026 from 96.89 in March 2026, continuing its rising trend since November 2021, driven by enhanced rated debt in higher investment-grade rating categories, with an upward movement indicating an improvement in the quality of debt benchmarked against the base year.