The Reserve Bank of India’s Monetary Policy Committee meets Monday through Wednesday, with its decision due Wednesday morning (10am IST). The consensus has moved fast: SBI’s Economic Research Department, Bank of America, Yes Bank chief economist Indranil Pan and IndusInd’s Gaurav Kapur (who puts the odds at 90 percent) all now expect a 25-basis-point increase from 5.25 to 5.50 percent. BofA brought its call forward from December to October. The move would be the first repo hike since February 2023.
The case is inflation, and it is broadening. CPI rose to 4.82 percent in August from 4.45 percent in July — above the RBI’s 4 percent target for a third straight month — with food and energy driving a generalization of price pressures. Brent above $100 has added imported-inflation risk. SBI also expects the RBI to upgrade its FY27 GDP forecast to 7.0 percent from 6.7 and inflation to 5.2 from 5.0.
The global context is the clincher. “The global environment argues against waiting,” SBI’s Soumya Kanti Ghosh wrote, noting that South Korea and the Philippines raised rates in August, followed by the US, Japan, the euro area and New Zealand in September. Waiting, the note argued, risks being behind the curve. Several forecasters see a second hike in December taking the terminal rate toward 5.75 percent. SBI chairman C.S. Setty told the Times of India last week that the bank’s in-house view supports a hike, adding it does not expect it to materially impact credit growth.