RBI Likely to Keep Policy Rates Unchanged in Upcoming Monetary Review

New Delhi — The Reserve Bank of India (RBI) is expected to maintain the current policy rates in its upcoming monetary policy announcement on Friday. Economists believe that despite easing measures in policy rates, government bond yields have continued to remain firm in recent months, influencing the central bank’s likely decision.

According to an SBI Research report, the selection of securities eligible for Open Market Operations (OMOs) can impact the effectiveness of liquidity infusion, even if the overall amount of liquidity injected remains the same.

“We believe that the choice of eligible securities itself may influence the effectiveness of OMO operations, even when the aggregate quantum of liquidity injection is unchanged,” the report stated, adding that the RBI is therefore likely to maintain the status quo in its upcoming policy decision.

Since the previous policy review, a significant development has been the EU-India and US-India trade agreements, which have resulted in a reduction of tariffs on Indian goods to 18 per cent from the earlier 50 per cent. This places India among the Asian countries with relatively lower tariff levels, which is expected to boost export competitiveness.

However, uncertainties in the global economy continue to pose challenges. The report highlighted that the Geo-Economics Stress Index indicates that increased uncertainty generally leads to economic stress after a lag of three to four months. Additionally, global metal prices have recently recovered after witnessing sharp declines last week.

The report also pointed out that slackness in the labour market, stagnant real disposable incomes, and lower inflationary pressures could push the US Federal Reserve towards rate cuts in the near future.

Meanwhile, the Indian rupee has shown volatility over the past two months, fluctuating between 89 and 92 against the US dollar. Since April 2, 2025, when the US announced sweeping tariff hikes across economies, the rupee has depreciated by 5.8 per cent against the dollar — the highest decline among major economies. However, it strengthened by more than Re 1 following the India-US trade agreement that lowered tariffs to 18 per cent.

The report further noted that the RBI has already conducted net OMO purchases worth Rs 6.16 lakh crore. Given ongoing global uncertainties, the central bank may conduct additional OMO purchases of up to Rs 50,000 crore during the remaining part of the financial year to ensure durable liquidity and support credit growth.

With inputs from IANS