NEW DELHI, May 22: Amid mounting concerns over rising crude oil prices and renewed pressure on the rupee due to escalating tensions in the Middle East, the Reserve Bank of India (RBI) is not considering an off cycle interest rate hike at present, according to a CNBC-TV18 report released on Friday.
Sources familiar with the matter said the central bank is not inclined to use interest rates as an immediate tool to defend the domestic currency and remains committed to its flexible inflation-targeting framework. Under this approach, the RBI balances both inflation control and economic growth while deciding monetary policy measures.
The report stated that the current sentiment within the RBI does not suggest any urgency for an unscheduled rate increase despite volatility in global energy markets and currency fluctuations. Policymakers are instead closely monitoring inflation trends and broader macroeconomic conditions before taking any major policy action.
Officials cited retail inflation data as one of the key reasons behind the RBI’s cautious stance. India’s Consumer Price Index (CPI)-based inflation eased to 3.48 per cent in April, comfortably within the RBI’s tolerance band. The central bank has projected average inflation for FY27 at 4.6 per cent, indicating that price pressures remain manageable despite global uncertainties.
Sources further noted that favourable base effects may help keep inflation under control in FY28 as well. According to the RBI’s latest Monetary Policy Report, even if crude oil prices climb to nearly 95 dollars per barrel during FY27, headline inflation is expected to remain around 5 per cent while economic growth could still hold steady at approximately 6.7 per cent.
The report also referred to recent remarks made by RBI Governor Sanjay Malhotra during an IMF-related event on May 18. The Governor had indicated that the central bank would “look through” the first-round impact of temporary supply-side shocks while evaluating future policy responses, signalling a preference for avoiding abrupt monetary tightening due to short-term external disruptions.
The clarification comes shortly after a Bloomberg report claimed that the RBI was evaluating various measures to stabilise the rupee, including a possible interest rate hike, additional currency swaps and raising overseas dollar funds from investors.
Market participants are now expected to closely watch the RBI’s next scheduled monetary policy announcement on June 5 for further guidance on interest rates, inflation outlook and the central bank’s strategy for managing currency volatility.
The RBI had previously undertaken an off-cycle policy move in May 2022, when it unexpectedly raised interest rates to contain surging inflation pressures following geopolitical disruptions and rising commodity prices.