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Informist, Wednesday, Aug. 5, 2026

 

By Pratiksha

 

MUMBAI – The Reserve Bank of India's Monetary Policy Committee is likely to keep the repo rate on hold for the fifth time in a row at its next meeting in October, according to an Informist Poll. However, a majority of economists sees rate hikes coming this financial year as the second order impact of cost pressure becomes visible. 

 

Fifteen of the 16 economists and market participants polled by Informist said they expect the rate-setting panel to hold the repo rate at 5.25% on Oct. 7. HSBC Bank expects the panel to hike rates by 25 basis points in October. Further, of the 16 participants, nine expect the Monetary Policy Committee to hike rates at least once in 2026-27 (Apr-Mar), with most expecting the first rate increase to happen at the December meeting. Seven economists said they do not expect an interest rate hike at all in 2026.

 

The committee left the repo rate unchanged at 5.25% Wednesday due to recent supply-side shocks not yet spilling over meaningfully into the wider CPI inflation basket. The Monetary Policy Committee had reduced the repo rate by 125 basis points in 2025, the largest cumulative easing in a calendar year since 2019. The repo rate was last raised in February 2023.

 

Most economists expect a repo rate hike, either in December or later in FY27, as inflation rises. The central bank Wednesday trimmed its CPI inflation projection for FY27 by 10 bps to 5.0%. However, the RBI sees inflation near the upper bound of the its 2-6% tolerance band in the December quarter. It sees inflation at 5.9% in Oct-Dec, before easing to 5.5% in Jan-Mar, still above the 4% medium-term target. 

 

"We expect the second-order effects of higher input costs to become visible from Q3 FY27 onwards, a view reinforced by management commentary across companies pointing to an impending pass-through of higher input prices to end consumers," HDFC Bank said in a note. "This, combined with the risk of an El Nino impact, tilts the balance of inflation risk to the upside."

 

Expectations of rising inflation, elevated global commodity prices, and resilient domestic demand suggest underlying inflation could build faster than the RBI currently anticipates, according to ANZ Banking Research. 

 

The RBI increased the GDP growth forecast for FY27 by 10 bps to 6.7%, with quarterly growth seen between 6.4%-7.0% throughout the year, reflecting resilience in economic activity in the face of global uncertainty. As per the RBI's fan chart, the FY27 growth can be 7% or even above, RBI Governor Sanjay Malhotra said Wednesday. The latest growth numbers have added to expectations that the rate-setting panel can raise interest rates to control inflation without hurting the world-beating growth.

 

"We too find that growth is strong, led by tailwinds from loose policy in 2026, strong domestic demand, strong export growth, and frontloading of manufacturing by domestic producers," HSBC Bank said in a note. "To put it differently, it doesn't seem that growth needs a helping hand from low interest rates." 

 

The following are the expectations of respondents on repo rate:

 

Organisation	October Meet Expectation	Interest Rate View Beyond October
ANZ Banking Research	Pause	50 bps rate hike in December, February
Bank of America	Pause	50 bps rate hike starting December
Bank of Baroda	Pause	Rate hike in December
Barclays	Pause	Pause in 2026
DBS Bank	Pause	Pause in FY27
Emkay Global Financial Services	Pause	Pause in FY27
HDFC Bank	Pause	25 bps rate hike in February
HSBC	25 bps rate hike	25 bps rate hike in December
ICICI Bank	Pause	50 bps rate hike in December or April
IDFC FIRST Bank	Pause	Pause in FY27
Kotak Mahindra Bank	Pause	50 bps hike between December-April
Morgan Stanley	Pause	Total 75 bps rate hike; first in December
MUFG Bank	Pause	Total 50 bps rate hike; first in December
Nirmal Bang Insitutional Equities	Pause	Extended pause
State Bank of India	Pause	No rate hike in FY27
Union Bank of India	Pause	Pause in 2026

 

End

 

Edited by Akul Nishant Akhoury

 

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