RBI may raise repo rate by 100 bps through H1 2027: BofA Securities
Bank of America Securities has revised its forecast for the Reserve Bank of India’s interest rate hikes. It now anticipates a total increase of 100 basis points by mid-2027. The first hike is expected during the monetary policy meeting in October. Economic growth remains strong, while inflation risks are increasing, prompting the RBI to adjust its monetary policy.
The Reserve Bank of India (RBI) may raise interest rates by a total of 100 basis points through the first half of 2027, according to a forecast from Bank of America (BofA) Securities. The brokerage firm has moved up its expected first rate hike to October 7, from December, in its latest India Viewpoint report. BofA Securities currently forecasts the repo rate to reach 6.25 percent by the end of the period.
BofA said it now expects three rate hikes instead of the earlier projected 50 basis points, taking its total forecast from 50 to 100 basis points. The firm attributes the larger hike to resilient domestic growth and broader inflation risks, citing rising oil prices, potential fuel price increases, and supply pressures in food products.
The brokerage expects the RBI to raise rates by 25 basis points in October, followed by another 50 basis points in the first half of 2027. The central bank is also expected to shift to a calibrated tightening stance in December, the report added.
BofA noted that strong economic growth is reducing the need for the RBI to keep monetary conditions too accommodative. Non-food credit growth was 17.8 percent year-on-year in September, and investment demand is expected to remain robust in the second quarter of FY27. However, if economic growth slows below 7 percent, the RBI may not raise interest rates or could refrain from raising them at all.
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