RBI rate hikes ahead? BofA sees 100 bps repo rate increase through H1 2027
Bank of America Securities anticipates that the Reserve Bank of India will implement significant interest rate hikes by mid-2027. They have adjusted their forecast for the initial hike to October instead of December, predicting a cumulative increase of 100 basis points, resulting in a terminal rate of 6.25 percent. This expectation is bolstered by economic growth and inflation concerns, but any…
Bank of America (BofA) predicts the Reserve Bank of India (RBI) could increase interest rates by 100 basis points by the first half of 2027, according to their latest outlook. This is an increase from their previous estimate of a 50-basis-point hike, marking a significant shift in their forecast.
BofA anticipates the RBI to raise the repo rate by 25 basis points during their meeting on October 7, followed by additional hikes totaling 75 basis points, bringing the projected terminal rate to 6.25%. This revised forecast is nearly double BofA's earlier estimate.
The brokerage attributes this larger forecast to two primary factors: a resilient domestic economy and broader inflation risks. Despite oil prices hovering around $100-$110 per barrel, rising fuel price increases and food supply pressures are contributing to inflation concerns. Economists also point to strong economic growth and rising non-food credit growth as reasons for the revised outlook.
BofA notes that food inflation is becoming more widespread, while wholesale inflation is spreading beyond traditional sectors. If real GDP growth remains around 7% and headline inflation stays close to 5.5%, the central bank may raise rates by more than 100 basis points, potentially pushing front-end rates above the 6.5% threshold. However, a slowdown in growth could lead to fewer hikes or no hike from the RBI.
Written by urgent.news from Times of India's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
