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Informist, Friday, May 29, 2026

NEW DELHI – Capital Economics expects the Reserve Bank of India's Monetary Policy Committee to raise the repo rate by 25 basis points next week, with a 50-bps increase also seen as a possibility. Rising inflationary pressures and concern about the rupee's weakness are likely to push the central bank to raise the repo rate from 5.25%, Capital Economics said. 

"Rising inflationary pressures have reduced the scope for policymakers to remain on the sidelines, but the main motivation for tightening will be mounting concern over the weakness of the rupee," Capital Economics said in a note. "In fact, a 50 bp rate hike cannot be ruled out if the Middle East conflict intensifies over the next week."

Calls for a repo rate hike have increased in recent weeks, with Standard Chartered and MUFG Bank also expecting the repo rate to be raised to 5.50% on Jun. 5. 

Inflation is expected to rise above the RBI's 4% target on the back of retail fuel price hikes in May. "An unfavourable base, shortages of fertiliser and the prospect of crop damage as a result of the ongoing heatwave all point to further jumps in food inflation," Capital Economics said. It forecasts a total of 75 bps of rate hikes between June and October.  End

Reported by Shubham Rana

Edited by Avishek Dutta

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