RBI MPC meeting: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) commenced its three-day policy meeting on Wednesday, 3 June, and Governor Sanjay Malhotra is set to announce the committee’s decision on Friday, 5 June.
The decision comes amid a surge in crude oil prices and intensifying geopolitical tensions in West Asia, which have introduced additional uncertainty into the policy outlook.
The RBI reduced the repo rate by a total of 125 basis points beginning in February 2025 as part of its monetary easing measures. Since then, the central bank has kept rates unchanged in its February and April 2026 policy reviews.
“Adding to the complexity, the Indian rupee has witnessed sharp volatility and recently weakened to nearly 97 to a dollar before recovering some of the lost ground. The persistence of geopolitical uncertainty, coupled with disruptions in global supply chains and energy markets, has made the policy environment increasingly difficult for the RBI and the Monetary Policy Committee,” said Sugandha Sachdeva, Founder of SS WealthStreet.
Will RBI announce a rate hike in upcoming June 2026 meeting?
According to wealth management firm DSP Mutual Fund, the central bank is unlikely to announce a rate hike; instead, it is likely to follow a step-by-step sequence before pulling the trigger on rates to defend the currency.
It further noted that the RBI has been continuously providing VRRs and has also announced a buy-sell swap. This indicates that the RBI is currently not signalling an immediate defensive interest rate hike.
“More importantly, these VRRs are under-subscribed, indicating that there is no severe systemic liquidity stress. If the RBI was positioning the curve for a near-term rate hike, it would be actively draining liquidity. Instead, by actively offering liquidity, the RBI is performing localised maintenance to insulate the domestic credit market from temporary tax and FX outflows,” it said.
Meanwhile, brokerage firm Emkay Global highlighted that if rates are raised, the objective would be to curb domestic demand pressures or anchor inflation expectations rather than defend the currency.
“We do not expect the RBI to use rate hikes for FX management, given the MPC’s inflation targeting mandate. Instead, we expect the RBI to continue managing FX volatility through reserves and regulatory measures, while potentially exploring incentives to boost USD inflows via external loans and other channels,” it said.
Market experts are anticipating the central bank to keep the repo rate unchanged in the upcoming June meeting.
Abhinav Tiwari, Research Analyst at Bonanza, said that the RBI is expected to hold rates steady in June; a more hawkish stance may emerge going forward. “If the West Asia conflict continues and inflationary pressures remain elevated, rate hikes from the August policy cycle cannot be ruled out.”
Tiwari noted that the possibility of further rate cuts now looks limited, while the probability of a rate hike in the coming months is increasing.
How’s RBI decision likely to impact the Indian stock market?
Tiwari believes that the central bank’s decision to maintain status quo will be have a positive impact on the Indian stock market. “Our expectation from the RBI’s June MPC meeting is that the central bank is likely to maintain a status quo on interest rates, and that itself would be viewed positively by the market,” he said.
On the other hand, Srivastava of SMC Global Securities said a June hike would likely trigger short-term selling in rate-sensitive sectors like banks, autos and real estate, while bond yields rise.
“In reality, one more hike may not “contain” inflation fully unless global crude and FX stabilise, and it won’t fuel equities – it may just prevent overheating. A hold seems more likely, supporting stocks near-term,” she added.
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