Central bank’s MPC meet begins today. Focus on fuel prices, inflation, currency

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) begins its meeting on Wednesday, with the policy decision due on June 5. The meeting will focus on how the central bank assesses the impact of higher crude oil prices, a weaker rupee, and inflation risks on the economy. RBI Governor Sanjay Malhotra will announce the outcome at 10 am on Friday, the same day that official gross domestic product (GDP) data for the January-March quarter (Q4) and FY2026 are released.The meeting comes at a time when retail inflation stood at 3.48 percent in April, below the RBI's medium-term target of 4 percent. At its April policy review, the RBI projected GDP growth of 6.9 percent for 2026-27 and consumer price index (CPI)-based inflation of 4.6 percent. However, the outlook has become more uncertain since the April policy review due to higher crude oil prices, a weaker rupee, and concerns over a below-normal monsoon.The MPC’s announcement and Malhotra's post-policy press conference will be streamed live on the RBI’s official website and YouTube channel.War, oil prices, and rupee cloud outlookThe US-Iran conflict has pushed up crude oil prices and raised concerns about imported inflation. Brent crude was trading around $94 per barrel on June 2 after touching an intraday high of $126.41 per barrel in April, its highest level since March 2022. India imports more than 85 percent of its crude oil requirements, making it vulnerable to sustained increases in energy prices.The rupee has also weakened this year, trading at around 95 against the US dollar on June 2, compared to about 82.8 at the start of the year.In its May economic review, the Ministry of Finance said elevated energy prices, a depreciating rupee, rising input cost pressures, and the prospect of a below-normal monsoon warrant continued vigilance on inflation, cautioning against weakening rural demand and slower growth. It also warned that higher wholesale prices could eventually be passed on to consumers; wholesale inflation rose to 8.3 percent in April, from 3.88 percent in March. The India Meteorological Department (IMD), in May, revised its monsoon forecast to 90 percent of the long-period average (LPA), down from 92 percent projected earlier.A Reuters poll conducted between May 22 and 29 found that 44 of 56 economists surveyed expect the RBI to leave the repo rate unchanged this week at 5.25 percent, while 11 expected a 25-basis point increase and one expected a 50-basis point hike. The RBI last changed the repo rate in December 2025, when it lowered the benchmark rate by 25 basis points to 5.25 percent. The poll also showed a growing number of economists expect at least one rate increase later in the year.

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