Emkay Global Financial Services expects the Reserve Bank of India to raise interest rates by another 50 basis points by February 2027. The firm forecasts quarter-point increases in December 2026 and February 2027, citing broader inflation pressures and tighter global financial conditions.
Key Takeaways
- Emkay forecasts two further 25-basis-point hikes, taking the current cycle’s total increase to 75 basis points.
- The share of CPI items with inflation above 4 per cent reached 46 per cent in September.
- The forecast is Emkay’s assessment, not a confirmed RBI policy decision.
Table of Contents
- RBI rate outlook points to gradual tightening
- Inflation spreads, but persistence remains uncertain
- Global rates and domestic growth shape the assessment
- Conclusion
RBI rate outlook points to gradual tightening
Emkay’s assessment of the October Monetary Policy Committee minutes supports further gradual increases, rather than a substantially longer tightening cycle. The firm said a significant extension would remain unlikely without stronger evidence that inflation is persistent.
The RBI raised its repo rate by 25 basis points to 5.50 per cent at the October meeting. All six MPC members backed that increase, but their views differed on the policy stance, with four supporting a shift towards calibrated tightening.
Inflation spreads, but persistence remains uncertain
The breadth of price increases was a central concern in Emkay’s analysis. The share of items in the Consumer Price Index basket recording inflation above 4 per cent rose from 20 per cent in March 2026 to 37 per cent in August and 46 per cent in September.
That widening did not establish that inflation had become entrenched. Emkay found limited evidence that the pressures were firmly embedded in companies’ pricing decisions, while some MPC members continued to view inflation as largely supply-driven.
Global rates and domestic growth shape the assessment
Emkay also identified overseas interest rates as a factor in future RBI decisions. Higher rates in major economies could increase India’s need to maintain an adequate interest-rate differential to attract foreign debt inflows.
Domestic growth remained strong: GDP expanded 7.8 per cent in the first quarter of FY2026-27, prompting the RBI to raise its full-year growth forecast to 7.1 per cent.
Conclusion
Emkay’s two-hike forecast depends on whether inflation spreads further and persists, as well as developments in global rates and capital flows. It is not a commitment by the RBI to raise rates.
Read More News
Disclaimer
This FinanceVelix article provides general information, not personalized financial, investment, legal, or tax advice. Market prices, interest rates and economic conditions can change; investments carry a risk of loss. Facts reflect the material available when published and may change. Check important information independently and consult a qualified professional when needed. Mentioning an asset, company, or service is not an endorsement.
