India's central bank kept its next rate move open after an October increase, while sharply different forecasts from global banks highlight uncertainty around borrowing costs as inflation remains a concern.
At its Oct. 5-7 meeting, the Reserve Bank of India’s six-member Monetary Policy Committee raised the repo rate by 25 basis points, or 0.25 percentage point, to 5.50%, with all members supporting the increase. The RBI also shifted its stance to calibrated tightening; in minutes released Oct. 21, the committee said “policy action ahead can only be a rate hike or a pause.” Two members favored retaining a neutral stance, as earlier EconoTimes coverage of the policy stance split noted.
The RBI’s policy resolution cited a deficient monsoon, El Niño conditions and high energy and commodity prices as sources of inflation pressure. It projected consumer price inflation at 5.2% for fiscal 2026-27, including 6.0% in October-December and 5.7% in January-March, while forecasting real gross domestic product growth of 7.1% for the year.
Analyst forecasts point to different rate paths. Reuters reported that Barclays expects two further increases in the current cycle, Goldman Sachs expects at least three between December and June 2027, and HSBC expects a 50-basis-point increase in December.
The Economic Times separately reported expectations for 25-basis-point increases in December and February, with another in April possible if crude remains above $100 a barrel. It also reported that Barclays sees a terminal rate of 6% and State Bank of India expects a 50-basis-point December increase. These are analyst forecasts; the RBI has not announced a timetable for further moves.
Moneycontrol cited analysts who said higher rates could raise real estate financing costs. They also said a wider yield gap with U.S. Treasuries could help retain portfolio capital in India and support the rupee. Reuters described October’s increase as India’s first rate hike in nearly four years. The MPC’s next meeting is scheduled for Dec. 2-4.
