RBI’s Rate Pause May Not Last Long, Report Signals Two Interest Rate Hikes In 2026

Mumbai: The Reserve Bank of India might increase the repo rate twice in 2026 due to persistent inflation, despite strong economic growth, according to Nomura. Rob Subbaraman, Nomura’s Head of Global Macro Research, anticipates the RBI to raise rates during the October and December Monetary Policy Committee meetings. Nomura projects India’s GDP to grow by 7% in FY27, but retail inflation could surpass 6% soon, reinforcing the need for tighter monetary policy.

The RBI absorbed ₹25,000 crore of banking system liquidity through its second Open Market Operations bond sale amid surplus funds. Rob Subbaraman believes India could draw global investment, enhancing its position in value chains, especially through high-end manufacturing. However, the economy may be at a disadvantage in sectors if AI investment remains concentrated in the US and Northeast Asia.

Foreign currency non-resident bank deposits have seen strong inflows, bolstering India’s external position and potentially generating a balance-of-payments surplus. The Federal Reserve has maintained a hawkish stance, signaling another interest rate hike this year, possibly in December, with additional increases possible if inflation remains high.