RBI likely to hold repo rate at 5.25% amid Iran war concerns: Report

The RBI is expected to hold the repo rate at 5.25% with a neutral stance, a Bank of Baroda report says. The decision is influenced by the Iran war, which has pushed oil prices above $100/barrel, increasing global financial volatility.

The Reserve Bank of India (RBI) is expected to keep the policy repo rate unchanged at 5.25 per cent in the upcoming Monetary Policy Committee (MPC) meeting and maintain its neutral stance, according to a report by Bank of Baroda.

Impact of Geopolitical Tensions

The report noted that global conditions have changed significantly since the RBI's last policy announcement in February 2026. It highlighted that the outbreak of the Iran war has heightened concerns in the Middle East, with damage to energy infrastructure in major oil-exporting economies. The situation has led to the Strait of Hormuz being virtually closed, pushing global oil prices above USD 100 per barrel. It stated, "We expect RBI to hold policy repo rate unchanged at 5.25 per cent and keep the stance as neutral".

Amid rising geopolitical tensions, global central banks are preparing for the impact of elevated oil prices on inflation. Financial markets have also remained volatile, leading to pressure on foreign portfolio investment (FPI) flows from India, equity markets, bond yields and the Indian rupee.

RBI's Policy Outlook

Given this backdrop, the report said the RBI is likely to announce its full-year growth and inflation forecasts while factoring in the impact of the ongoing conflict on the domestic economy. It added that the central bank is expected to remain vigilant and hold rates steady for now, without changing its stance from neutral.

The report further stated that this could mark the end of the rate cut cycle, with the central bank likely to adopt a prolonged pause going forward. It added that the impact of the war on growth and inflation will become clearer over the next 3-4 months, after which the RBI may reassess its policy trajectory. According to the report, if oil prices remain above USD 100 per barrel for a sustained period and inflation breaches the RBI's upper tolerance band of 6 per cent, there could be a possibility of a rate hike by the central bank towards the end of FY27.

Potential Support Measures

In the upcoming policy, the RBI may also consider measures to support liquidity and stabilise the Indian rupee, the report added.

Meeting Schedule

The RBI's MPC meeting is scheduled to be held on April 6, 7 and 8, with the policy outcome to be announced by RBI Governor Sanjay Malhotra on the last day of policy at 10 AM. (ANI)

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