RBI begins key policy review amid West Asia tensions, rate decision due Wednesday

The Reserve Bank of India’s Monetary Policy Committee (MPC) on Monday began its three day deliberations on the first bi monthly monetary policy of the new financial year, with economists widely expecting the central bank to keep the benchmark lending rate unchanged amid growing global uncertainties.

The six member panel, chaired by RBI Governor Sanjay Malhotra , is assessing the latest economic conditions before announcing its decision on Wednesday . While domestic inflation has recently moved closer to the central bank’s target level, the ongoing crisis in West Asia and the resulting surge in global crude oil prices have raised fresh concerns for policymakers.

Since February 2025 , the RBI has reduced interest rates by a total of 125 basis points , marking one of the most aggressive easing cycles since 2019. The last rate cut of 25 basis points came in December , after which the MPC kept rates unchanged during its February review.

Economists say the panel will closely watch the sharp rise in crude oil prices , which have jumped from around USD 60 per barrel to above USD 100 since the conflict began. Higher oil prices could push up fuel and transportation costs, potentially feeding into broader inflation.

According to estimates, every USD 10 increase in crude prices could raise inflation by up to 0.60 per cent , making energy markets a crucial factor in the RBI’s policy calculations.

Another challenge is the depreciation of the rupee , which has weakened by more than 4 per cent since the start of the conflict , increasing the cost of imports and adding to inflationary pressure.

Despite these risks, analysts expect the central bank to retain its neutral policy stance , allowing it to remain flexible while monitoring global developments, commodity price movements, and financial market stability. Policymakers will also assess liquidity conditions, capital flows, and bond market trends before taking any future policy action.