RBI seen on hold through 2027 as oil risks skew inflation outlook higher
Summary:
- Reuters poll: 69 of 71 economists expect RBI to hold at 5.25% on April 8
- Majority see rates unchanged until at least mid-2027
- Inflation below 4% target gives RBI policy flexibility
- Middle East conflict raises oil-driven inflation risks
- RBI expected to maintain neutral stance, avoid dovish tone
- Growth seen around 7%, but stagflation risks flagged
A strong majority of economists expect the Reserve Bank of India (RBI) to keep its benchmark repo rate unchanged at 5.25% at its April 8 policy meeting, according to a Reuters poll, with expectations building that rates will remain on hold for an extended period—potentially until mid-2027.
The survey, conducted between March 23–26, showed 69 of 71 economists forecasting no change at the upcoming meeting, underscoring a broad consensus that current policy settings remain appropriate. This view has remained largely stable since February, despite the escalation in geopolitical tensions linked to the Middle East conflict.
India’s inflation backdrop has provided policymakers with some flexibility. Price pressures have remained below the RBI’s medium-term 4% target for roughly a year, allowing the central bank to maintain a neutral stance while monitoring evolving risks. At the same time, economic growth continues to hold firm, with forecasts pointing to an average expansion rate of around 7.0% over the coming fiscal years.
However, the external environment has become more uncertain. The ongoing conflict involving Iran has disrupted key global energy supply routes, including critical shipping corridors, raising the risk of higher oil prices. As one of the world’s largest oil importers, India remains particularly sensitive to such shocks, which could feed through to inflation and complicate the policy outlook.
Economists broadly agree that while current inflation conditions are benign enough to absorb some energy-driven price increases, risks are skewed to the upside. The central bank is therefore expected to remain cautious, balancing the need to support growth with vigilance over potential inflationary pressures.
Most analysts believe it is too early to consider any rate hikes, despite these risks. Instead, the RBI is likely to maintain its neutral policy stance, avoiding premature tightening while closely assessing how geopolitical developments evolve. At the same time, there is a clear expectation that policymakers will avoid sounding overly dovish, given the uncertain trajectory of global energy markets.
Looking ahead, inflation is projected to average around 4.3% over the next two fiscal years, broadly in line with previous forecasts. However, concerns about stagflation risks are emerging, with a majority of economists identifying a combination of slower growth and rising prices as the key downside scenario facing India’s economy.
