Emkay Global Financial Services expects the Reserve Bank of India to raise interest rates by another 50 basis points by February 2027, citing rising inflationary
pressures and tighter global financial conditions. In its analysis of the minutes of the RBI's October Monetary Policy Committee meeting, Emkay forecasts a 25 basis point rate hike each in December 2026 and February 2027. This would take the total rate hike in the current cycle to 75 basis points. The report stated that the MPC minutes supported further gradual rate hikes but indicated that a significant extension of the tightening cycle remained unlikely without stronger evidence of persistent inflation. Emkay's report identified the spread of inflation across goods and services as a key concern. The share of items in the Consumer Price Index basket recording inflation above 4 percent rose from 20 percent in March 2026 to 37 percent in August and 46 percent in September, according to the report. However, the report mentioned there was limited evidence that these pressures had become firmly embedded in companies' pricing decisions. Some MPC members also maintained that inflation was largely driven by supply-side factors. Emkay's study highlighted that higher rates in major economies could increase the need for India to maintain an adequate interest-rate differential to attract foreign debt inflows. During the October meeting, the RBI raised the repo rate by 25 basis points to 5.50 percent. While the decision was unanimous, the minutes showed differences among MPC members over the policy stance, with four of the six members supporting a shift towards calibrated tightening. Emkay stated the RBI's next policy move will depend on whether inflationary pressures spread further and persist, along with changes in global interest rates and capital flows. Its forecast represents the firm's assessment and does not indicate a confirmed decision by the central bank. (With Inputs From ANI)
