MPC Meeting: Will Interest Rates on Your Home and Car Loans Go Down? Bank of Baroda Makes This Prediction..

The meeting of the Reserve Bank of India's Monetary Policy Committee (MPC) is scheduled to take place this month. No changes to interest rates are expected during this meeting, and the Repo Rate is likely to be maintained at 5.25 percent. A report released by Bank of Baroda on Thursday suggests that this decision may be taken in light of the ongoing conflict in the Middle East and rising oil prices.

According to the Bank of Baroda report, the cycle of interest rate cuts has now concluded, and the RBI is likely to keep rates stable for an extended period. The report states that the central bank will currently adopt a neutral stance while closely monitoring the evolving situation. Additionally, specific measures may be undertaken to manage liquidity and support the Indian Rupee.
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**Interest Rates to Rise if Inflation Surges**

The report further notes that if inflation breaches the upper limit of 6 percent, interest rates could potentially be hiked by the end of the year. According to the report, "The impact of the conflict on economic growth and inflation will become evident over the next 3–4 months. Subsequently, the RBI will decide on the future trajectory of its interest rates."

Since the previous policy meeting, energy supplies have been disrupted due to the US-Iran conflict, specifically because of the closure of the Strait of Hormuz. Consequently, crude oil prices have surged past the $100-per-barrel mark. Markets, too, have witnessed significant volatility. As a result of this conflict, foreign investors (FPIs) are withdrawing capital from India; bond yields have risen, and the Indian Rupee has depreciated against the US Dollar, hitting a record low of 94.83.

**Impact of the Conflict**
The report asserts that this conflict will have repercussions on both global economic growth and inflation. India will not remain immune to these effects; therefore, the RBI may revise its projections for GDP growth and inflation for the fiscal year 2027. In the monthly economic bulletin recently released by the CEA, a warning has been issued that the Current Account Deficit (CAD) is likely to widen significantly even in the fiscal year 2027. The bank has projected GDP growth of 7.6 percent in FY26 and between 7 and 7.2 percent in FY27. Additionally, the bank has expressed apprehension regarding a widening of the current account deficit.

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