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Informist, Thursday, Apr. 2, 2026

 

NEW DELHI – The Reserve Bank of India may hike interest rates by 25 basis points to 5.50% in 2026-27 (Apr-Mar) if the crude oil prices sustain above $100 per barrel, which may push inflation above 6%, HSBC said in a report Thursday. However, the central bank may not need to increase the interest rates in FY27 if oil prices stay around $80 a bbl, which would keep inflation around 4.5% this year, economists at HSBC said.

 

India is at an important crossroads with crude oil prices averaging $100 per bbl in March, HSBC said. "Whether the price dips below USD100/bbl or remains well above over the next month could determine whether or not the repo rate is increased," HSBC said. Economists at the bank project India's inflation in FY27 at 5.3% if oil prices average $100 per bbl with growth seen at 5.7%. In this adverse scenario, HSBC forecasts the RBI will raise the repo rate by 25 bps to 5.50%. 

 

In HSBC's base case, where crude oil averages $80 per bbl, inflation is seen at 4.5% in FY27 and growth at 6.3%. Even if inflation remains under 6%, the central bank may not feel the pressure to hike interest rates as inflation will gradually return towards 4% over a one-year horizon, HSBC said.

 

"We believe the RBI can look through inflation shocks of 2ppt (200 bps) or under, as that would still keep inflation below 6%, the report said.

 

On whether the RBI will raise rates to defend the rupee, HSBC said that rising energy prices could lead to a non-linear and rising drag on growth, making the rate defence more expensive than a normal oil price shock.  End

 

US$1 = INR 93.10

 

Reported by Shweta

Edited by Deepshikha Bhardwaj

 

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