RBI expected to hold rates at 5.25 percent amid energy shock
India's central bank is expected to keep interest rates at 5.25 percent. Officials aim to stabilize markets amid a severe energy shock and a record low rupee.
The central bank of India is widely expected to maintain current interest rates as it evaluates the economic fallout from the conflict in Iran. This geopolitical instability has pressured the local currency and sovereign bond markets, signaling an end to the "Goldilocks" period of high growth and low inflation previously highlighted by officials. Economists and market participants suggest the Reserve Bank of India (RBI) will shift its focus toward stabilizing financial markets, providing assurances of liquidity support to manage bond yields and the weakening rupee. A Reuters poll of 71 economists conducted in late March revealed that nearly all respondents expect the benchmark repo rate to hold steady at 5.25%. Although the RBI implemented 125 basis points in rate cuts earlier in 2025, the current energy shock has halted further easing. Pranjul Bhandari, the chief economist for the region at HSBC HOLDINGS PLC, noted that if high energy costs persist, the resulting drag on growth could be more significant than the inflationary impact.
The combination of weaker growth and rising inflation argues for a neutral policy stance that neither stimulates nor restrains demand.
