Aetram Research India: *RBI MPC Preview | Key Things To Watch In June Policy Review*

RBI is expected to keep the Repo Rate unchanged at 5.25% during the June MPC meeting.
Market participants believe the policy stance and RBI's commentary will be more important than the rate decision itself.
RBI is likely to adopt a "wait-and-watch" approach amid rising geopolitical tensions and volatile crude oil prices.
The central bank's assessment of the ongoing West Asia conflict and its potential inflation impact will be closely monitored.

RBI's FY27 inflation forecast currently stands at 4.60%.
Inflation risks have increased due to:
Higher Brent crude oil prices.
Rupee depreciation.
Possible weak monsoon conditions.
Rising transportation and input costs.
Oil marketing companies have increased petrol and diesel prices by approximately ₹7.50 per litre cumulatively.
Economists estimate fuel price hikes could add 30–35 basis points to inflation in coming months.
April CPI inflation stood at 3.48%, compared with 3.40% in March.
While inflation remains within RBI's target band of 2%–6%, any sharp rise could alter future policy decisions.
Some economists expect FY27 average inflation to move towards 5.00%–5.10%.

RBI's current FY27 GDP growth forecast stands at 6.90%.
Growth risks are increasing due to:
Elevated energy prices.
Weakening consumer demand.
Global trade uncertainties.
Geopolitical tensions.
Tightening financial conditions.
Experts expect RBI may revise FY27 GDP growth estimates lower toward 6.00%–6.20%.
Export demand remains vulnerable amid periodic global economic slowdowns.
RBI is expected to maintain supportive financial conditions for businesses and consumers.

Indian Rupee has depreciated nearly 5% on a year-to-date basis.
Since the April MPC meeting, the Rupee has weakened by more than 2.50%.
USD/INR recently approached the psychological ₹97.00 level before recovering partially.
Continued Rupee weakness remains a concern for policymakers.

RBI is unlikely to raise interest rates solely to defend the currency.
Alternative measures under consideration may include:
Reintroduction of FCNR(B) deposit schemes.
Relaxation of taxation norms for overseas bond investors.
Easing hedging regulations.
Measures to attract higher foreign capital inflows.
Government is reportedly exploring tax-related incentives to encourage foreign investment in Indian sovereign debt.

• Markets are likely to react more to RBI's language and future outlook than to the rate decision itself.