Stories
Will RBI Join Global Rate-Hike Cycle Amid Rising Inflation?
- •Analysts expect the Reserve Bank of India to kick off a new rate-hike cycle with a cautious 25-basis-point increase while retaining its neutral policy stance.
- •Inflation is becoming a major challenge as price pressures spread beyond vegetables and pulses to sugar, milk, and edible oils, with core inflation momentum rising.
- •Global factors such as the US Federal Reserve raising rates, crude oil prices above $100 a barrel, and tightened financial conditions are heavily influencing RBI decisions.
- •Liquidity management remains a key issue, with the October policy expected to provide clarity on surplus funds absorption and potential open market operation bond sales.
Key Questions Answered
Analysts expect the Reserve Bank of India to kick off a new rate-hike cycle with a cautious 25-basis-point increase while retaining its neutral policy stance. A 50-basis-point hike remains an outside possibility as global central banks turn more hawkish and crude oil prices rise.
Headline inflation could run around 20 basis points above projections, with price pressures broadening beyond vegetables and pulses to sugar, milk, edible oils, and protein-rich food groups. The share of the Consumer Price Index basket experiencing inflation above 6 per cent rose to about 29 per cent in August 2026.
Liquidity management remains a key issue as FCNR-led excess liquidity keeps monetary conditions relatively accommodative. The central bank could announce additional open market operation bond sales, with system liquidity expected to stay above 1 per cent of net demand and time liabilities by the end of FY27.
