RBI’s policy decision effectively rules out interest rate hike in FY27 amid benign inflation outlook: Experts

New Delhi: The RBI’s policy decision has effectively ruled out any interest rate hikes in FY27 amid a benign headline inflation outlook, even as it will remain in a wait-and-watch mode to evaluate incoming economic data and guard against second-order price pressures before taking a call on rates, experts said on Wednesday.

The Reserve Bank on Wednesday kept the benchmark lending rate unchanged at 5.25 percent for the fourth time in a row, while marginally lowering the inflation forecast to 5 percent for the fiscal and increasing the GDP growth projection a tad to 6.7 percent.

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SBI Research in its 'Ecowrap' said that as expected, the RBI MPC unanimously decided to keep the repo rate unchanged and continue with the neutral stance.

A 10 bps increase in growth forecast of FY27 (and Q1 estimate of 7 percent) and an equivalent reduction in retail inflation forecast for FY27 reveal that the resilient domestic economy has been able to fathom headwinds with material parameters and indicators showing an accelerated pace in the April-June quarter, it said.

Interestingly, a lexicon-based natural language processing approach was employed to quantify the communication tone of the RBI Governor's statement into three communication dimensions -- dovish, hawkish and uncertainty, the report said.

The analysis indicates that the policy statement exhibits a predominantly dovish communication profile, followed by the uncertainty communication and hawkish communication.

"Clearly, the RBI policy statement pushes out any rate hikes in FY27, with inflation also remaining benign at 5 percent and core inflation at 4.3 percent," the SBI Research added.

Yes Bank Chief Economist Indranil Pan said that while small changes have come through for the growth and inflation forecasts, one should not read too deeply into these as these appear to be mere adjustments and reflect the actual data flows of Q1 FY27.

"While adopting a wait-and-watch for now, the RBI will track incoming data and watch out for second-order inflation before taking a call on rates. While all policies starting from October remain live, we think the RBI will be willing to hold back on its rate increase for the maximum period as any pre-emptive hike can dent growth," he said.

Tata Capital MD and CEO Rajiv Sabharwal said the central bank's decision reflects its calibrated approach to balancing inflation expectations and growth amid global uncertainties.

The upgraded GDP growth outlook, backed by strong domestic demand, corporate resilience, and services sector momentum, reinforces confidence in India's economic fundamentals while maintaining stance on inflation, he said.

"Looking ahead, while global uncertainties and elevated energy prices could moderate growth for FY27 from a high base, India's underlying macroeconomic fundamentals continue to remain strong, supported by strong domestic demand and investment activity," Sabharwal said.

A report by Crisil said while CPI-linked inflation crossed the 4 percent target in June, core inflation has been relatively contained, suggesting limited generalisation of inflation pressures so far.

But the monsoon, advancing in El Nino's shadow, bears watching, it said, adding that the West Asia endgame also remains unpredictable.

"In this scenario, we expect CPI-linked inflation to rise to 5.1 percent, and GDP growth to slow to 6.6 percent this fiscal. Amid this tradeoff, the MPC’s approach on policy rates will likely be flexible, monitoring any rise in inflation risks," Crisil said.

L&T Finance Managing Director and CEO Sudipta Roy said while an unchanged rate action was along expected lines, the RBI’s continued focus on domestic macro dynamics and patience through short-term pressures supports robust credit growth momentum in the economy.

"Proactive liquidity management and policy measures to enhance transparency and consumer protection bode well for long-term growth in the retail lending sector," Roy added.

Indel Money CEO Umesh Mohanan said that while inflation is expected to edge up in the coming quarters, the pressures remain largely supply-driven, stemming from higher food and fuel prices amid geopolitical developments, rather than broad-based demand pressures.

In this backdrop, maintaining the policy rate and retaining flexibility is a prudent step that allows the RBI to respond appropriately to evolving macroeconomic conditions, he added.

Resurgent India Managing Director Jyoti Prakash Gadia said maintaining a status quo was a judicious option in the wake of uneven and deficient rainfall, which would impact food prices.

The trade-off between growth and inflation is at present at a challenging inflation point, and a well-considered policy rate change will require further examination of the ensuing macroeconomic situation, he said.

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Shrikant Goyal, co-founder, Getfive, said that for Indian small and medium enterprises (SMEs), the RBI's steady stance provides much-needed predictability for long-term capital structuring.

"As businesses look to scale, stable borrowing costs will serve as a strong foundation. At GetFive, we view this neutral stance as an opportune window for growth-focused companies to optimise their capital structures and strengthen their fundamentals," he said.

Lakshmi Venkataraman Venkatesan, Founding and Managing Trustee, Bharatiya Yuva Shakti Trust, said that with the MSME Amendment Bill 2026 also on the table, this monsoon session, near-term policy stability provides valuable predictability in managing borrowing costs, working capital, repayments and investment decisions for micro and small entrepreneurs.

"Stable credit conditions must also be supported by timely payments to micro and small enterprises, as affordable credit alone cannot ease cash-flow pressures when businesses do not receive payments on time," Venkatesan said.

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