Indian Rupee: Hawkish RBI pause shifts rate outlook – Societe Generale
Societe Generale’s Kunal Kundu says the Reserve Bank of India's (RBI) August 2026 Monetary Policy Committee (MPC) minutes reveal a more hawkish inflation assessment than the policy statement suggested.
Indian Rupee's outlook has shifted following hawkish RBI pause, as revealed by the August 2026 Monetary Policy Committee (MPC) minutes, according to Societe Generale's Kunal Kundu. The minutes illustrate that the easing cycle has effectively concluded, with the August decision acting more as a hawkish pause. The RBI anticipates an initial 25 basis points (bps) rate hike in December 2026, with another 25 bps increase expected in the first half of 2027.
Deputy Governor Poonam Gupta emphasized that the possibility of further easing appears non-existent, and a case for rate increase could arise during the year. The RBI's decision in August does not indicate a dovish pause, but rather a hawkish pause, with the central bank waiting for evidence that the inflation shock is persistent or widespread before raising rates.
Thus, Societe Generale retains its expectation of an initial 25 bps policy rate increase at the December 2026 MPC meeting, followed by another increase of similar magnitude in either Q1 or Q2 2027, signaling the end of a shallow tightening cycle.
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