RBI MPC Meeting Begins: RBI Expected to Avoid Rate Hike, Says DSP Mutual Fund

The RBI MPC meeting opened today, June 3, 2026, and markets are watching closely. The three-day meeting runs from June 3 to June 5, with RBI Governor Sanjay Malhotra set to announce the policy outcome at 10:00 a.m. 

The RBI policy decision will be announced at 10:00 a.m. IST on June 5, followed by a press conference later that day. Markets strongly expect the central bank to keep the benchmark repo rate unchanged at 5.25% for the third straight meeting.

DSP Mutual Fund is among the institutions backing a pause, arguing that current inflation pressures are largely supply-driven and do not yet justify tighter policy. However, investors will closely watch RBI Governor Sanjay Malhotra, as the tone of his June 5 commentary could drive market reaction.

Repo Rate at 5.25%: What Got Us Here

The current 5.25% repo rate reflects a sharp policy reversal from 2025’s easing cycle.

In June 2025, the RBI MPC cut the repo rate by 50 basis points to 5.5% and shifted its stance to neutral, the third consecutive cut that cycle. Since then, the macro backdrop has changed rapidly. Wholesale inflation surged to 8.3% in April 2026, the highest level in 3.5 years. The rupee fell to a record low of 96.96 against the US dollar before recovering to just above 95 on June 1, aided by RBI interventions and some decline in oil prices amid hopes of a US-Iran truce. 

Those numbers make the June MPC meeting significantly more complex than the ones that preceded it.

RBI MPC Meeting: What the Analysts are Saying?

Institutional opinion is broadly aligned but with important caveats.

Status quo camp:

• DSP Mutual Fund and ICRA both rule out an immediate rate hike, arguing current pressures are supply-driven rather than demand-driven, giving the RBI room to hold.
• SBI Research stated the RBI can manage rupee pressure through targeted liquidity interventions and short-term rate measures rather than raising the repo rate outright.
• Centricity WealthTech expects a 30-40 basis point pass-through into inflation from fuel prices over the coming months, but not enough to trigger immediate tightening at this stage.

Rate hike camp:

• Standard Chartered Bank expects the MPC to begin raising rates from June itself, projecting a cumulative 50 basis points, as upside inflation risks from higher commodity prices and currency pressure outweigh growth concerns.
• Most Business Standard poll respondents see at least one rate hike this financial year, indicating the interest rate trajectory is expected to reverse sooner rather than later.

The Key Risks Driving the Debate

Three macro variables are sitting at the centre of the June MPC discussion:

Risk Factor	Current Reading	Impact
CPI Inflation (April 2026)	3.48%	Within a 2-6% band
WPI Inflation (April 2026)	8.3%	3.5-year high
Rupee vs USD	~95.00	Down 10%+ in 12 months
Repo Rate (current)	5.25%	Third consecutive hold expected
Brent Crude	Elevated	West Asia conflict risk

RBI Governor Sanjay Malhotra previously warned that the West Asia conflict could pressure exports, disrupt critical commodity supplies, raise energy prices, affect remittances, and weaken global demand. Despite these risks, he said India’s FY27 outlook remains cautiously positive.

What Markets and Borrowers Should Watch on June 5

The repo rate decision itself may not be a surprise. The language around it will be.

The policy stance is widely expected to remain neutral, but the tone of the RBI’s commentary is expected to skew heavily hawkish. A hawkish hold where rates stay unchanged but the RBI signals readiness to hike would tighten financial conditions without a single basis point move. That outcome would pressure rate-sensitive stocks, including banking names like HDFC Bank (NSE: HDFCBANK), ICICI Bank (NSE: ICICIBANK), and Kotak Mahindra Bank (NSE: KOTAKBANK), all of which carry significant floating-rate loan book exposure.

ICRA Chief Economist Aditi Nayar said inflation staying elevated beyond June could prompt a rate hike later this year, possibly in December.

For now, the base case remains unchanged: no move on June 5, but Governor Sanjay Malhotra is expected to deliver a more guarded statement than markets have recently seen. Follow the June 5 announcement live on RBI and The Economic Times for real-time policy updates.

Disclaimer:

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