On May 25, Barclays economists released a report suggesting that the Reserve Bank of India (RBI) is likely to keep interest rates unchanged during its June policy meeting. According to Jin10, the economists noted that while the RBI may raise its inflation expectations and lower its economic growth forecasts, it is expected to overlook the current inflationary pressures driven by supply-side factors. However, ongoing conflicts in the Middle East have led to sustained high energy prices, indicating that price pressures could become more persistent, potentially challenging Barclays' baseline prediction that the RBI will maintain rates for the remainder of 2026.
The report further highlighted that the spillover effects of rising energy prices on transportation and other raw material costs might eventually compel the central bank to consider rate hikes. "Economic growth impairment will undoubtedly be a significant factor in the central bank's decision-making process; however, at present, we believe the risk of inflation shocks outweighs the risk of growth shocks," the report concluded.