RBI likely to hold rates in June MPC meet, GDP pegged at 6.6 pc for FY27: SBI report

SBI Research expects RBI to hold repo rate in June, using short-term tools to manage rupee pressure. FY26 GDP growth seen at 7.5%, FY27 at 6.6%. Inflation risks persist, crude may stay above $90, urging excise duty cuts 

New Delhi: The Reserve Bank of India (RBI) is likely to hold repo rate hike in its June monetary policy meeting and must use short-term rates and nudging to manage the pressure on the domestic currency, an SBI Research report said on Sunday.

“Our call is along ‘hold the rates’ with a data-driven future dependency. However, an inflation targeting central bank can always use interest rate tools like operation twist that addresses market microstructure,” the report suggested.

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It projected GDP growth at 6.6 per cent for FY27. However, with the continued geopolitical uncertainties, the numbers will be revised as more data comes in, the report mentioned.

The report expected Q4 FY26 real GDP growth at closer to 7.2 per cent and FY26 GDP growth likely to be at 7.5 per cent. Going by the growth-inflation spiral, CPI trajectory (as of now) may indicate more than 5.0 per cent inflation for the next three quarters (current quarter at 4.0 to 4.1 per cent).

“FY27 CPI inflation projections are currently at 5 per cent with risks tilted to upside, though well under RBI’s target range,” said the SBI report.

Despite strong macro fundamentals, rupee is depreciating much more compared to other currencies. “Therefore, there is a need for augmented intervention by the RBI. Also, India’s forex reserves are optimally sufficient to combat the unidirectional slide of rupee, while aiming to curb excess/undesired volatility concomitantly as the prime aim. There is a clear felt need for a comprehensive BOP package,” the report noted.

With no trust woven in ongoing ‘peace’ talks in West Asia, the risk premium can remain detached from the underlying going forward, taking a toll on Crude prices that could be trading above $90 for major parts of the 2026.

“Mathematically, excise duty on diesel and petrol need to be reduced by Rs 5 to cover the OMC loss completely from the current levels, otherwise domestic fuel prices need to be further increased by Rs 6 from current levels,” the report said.