SBI Research, IDFC First expect rate hike in October as crude prices climb: Higher oil prices & inflation raise likelihood of policy tightening
Economists are gearing up for a potential rate hike from the central bank as soon as October, driven by escalating crude oil prices and ongoing food inflation concerns. The CEO of Axis Bank has raised alarms about the increasing risks of inflation. This shift in monetary policy timing comes as the Monetary Policy Committee prepares to evaluate interest rates in early October, reversing earlier…
Recent forecasts from SBI Research and IDFC First Bank anticipate a rate hike from the Reserve Bank of India (RBI) in October. This comes after crude oil prices surged due to tensions in West Asia, reaching around $108 a barrel. Inflation risks are also rising due to persistent food prices and strong economic growth, according to both institutions.
The Monetary Policy Committee of the RBI will meet from October 5 to 7 to assess interest rates, with the current repo rate at 5.25%. Axis Bank's CEO, Amitabh Chaudhry, warned that a rate hike might be necessary sooner rather than later given inflation concerns.
IDFC First Bank and SBI Research highlighted that rising oil prices, high food inflation and robust economic growth increase the chance of tighter monetary policy. They warned that prolonged supply shocks could feed into inflation and expectations, even as the RBI reduces excess liquidity.
If oil prices stay high, inflation could rise to 6.5% or more in October and November, according to SBI Research. The RBI's October policy meeting could start as early as October or as late as December, with a higher likelihood of an October hike due to inflation peaking in Q3 FY27.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
