2 min readApr 9, 2026 06:00 AM IST First published on: Apr 9, 2026 at 06:00 AM ISTThe April meeting of the RBI’s Monetary Policy Committee was held in a macroeconomic climate starkly different from the benign milieu of its February meeting. The conflict in West Asia has raised the spectre of stagflation, far removed from the Goldilocks environment of low inflation and steady growth. Even as a two-week ceasefire has now been agreed upon, the MPC has opted, rightly, to wait and watch. The repo rate remains unchanged at 5.25 per cent, and the neutral stance has been retained. The committee’s rationale was straightforward: “The economy is confronted with a supply shock. It is prudent to wait and watch the changing circumstances and the evolving growth-inflation outlook,” it said.Dislocations in the energy markets have led to price surges and strained supplies. Disruptions have, in fact, moved to other commodities, and a wide range of sectors have been affected with knock-on effects on jobs and incomes. While the situation remains uncertain, the RBI has forecast headline inflation at 4.6 per cent in 2026-27. Notwithstanding the ceasefire, the likelihood of global fuel prices staying elevated — prices at the pump in India have so far remained unchanged — coupled with the possibility of fertiliser shortfalls and El Niño conditions could complicate matters. On the other hand, the central bank has now projected the economy to grow at 6.9 per cent this year, down from an expected 7.6 per cent in 2025-26. There are considerable risks, as the committee notes that “further escalation and wider spread of the conflict, heightened volatility in global financial markets and weather-related events, however, weigh on the domestic growth outlook”. Monetary policy action down the line will depend on how growth and inflation evolve, and the extent of the deviation in their trajectory from the RBI’s assessment.’AdvertisementFollowing the ceasefire, markets the world over soared. Nikkei 225 was up (5.39 per cent), as was Kospi (6.87 per cent), Sensex (3.95 per cent) and FTSE 100 (3.07 per cent). Brent crude oil fell, and is currently trading at around $92.3 per barrel. Much will depend on whether the ceasefire holds and how long it takes for the energy supply constraints to ease.