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RBI to Hike Repo Rate by 100 Bps Through H1 2027, BofA Securities Forecasts
- •BofA Securities now forecasts the Reserve Bank of India (RBI) will raise interest rates by a total of 100 basis points (bps) through the first half of 2027, up from an earlier forecast of 50 bps.
- •The brokerage expects a 25 bps hike at the October 7 monetary policy meeting, with another 75 bps thereafter, bringing the projected terminal rate to 6.25 percent.
- •BofA attributes the accelerated forecast to resilient domestic growth and broadening inflation risks, including oil prices around USD 100-110 per barrel and rising fuel/food price pressures.
- •The RBI is expected to deliver 50 bps of rate hikes in Q4 2026 and another 50 bps in H1 2027, with a shift to a "calibrated tightening" monetary policy stance in December.
- •Strong economic growth, evidenced by 17.8 percent non-food credit growth, reduces the need for accommodative monetary conditions, while increasing food and wholesale inflation risks persist.
Key Questions Answered
BofA Securities expects the Reserve Bank of India to raise the repo rate by a total of 100 basis points through the first half of 2027. The brokerage forecasts a 25-basis-point hike at the October 7 monetary policy meeting, followed by another 75 basis points of hikes, bringing the projected terminal rate to 6.25 per cent.
BofA points out that domestic economic growth remains resilient and non-food credit growth stood at 17.8 per cent year-on-year in September. At the same time, inflation risks are expanding due to oil prices staying around USD 100-110 per barrel in September, alongside rising fuel price increases and broad-based food supply pressures.
According to the latest report, BofA Securities expects the central bank to switch its monetary policy stance in December to one of calibrated tightening.
