Business · Economy · 1 hr ago
Report warns India inflation could reach 7% and require more rate hikes
A Systematix Institutional Equities report warns that inflation in India could reach 6–7% in the coming quarters.
It says the Reserve Bank of India may be underestimating price pressures, which include rising business costs, high household inflation expectations and supply disruptions.
The bank has raised its benchmark repo rate by 0.25 percentage points to 5.5% and moved towards tighter policy.
Systematix says further increases of 1 to 1.5 percentage points could be needed, taking the rate to 6.5–7%.
The bank expects inflation to reach 6% in the third quarter of fiscal 2027, while it has raised its growth forecast for that year to 7.1%.
Higher rates could make borrowing more expensive, while rising costs could squeeze company earnings.
The report also warns that government bond yields could rise above 7.5% if inflation exceeds expectations and the bank keeps raising rates.
A Systematix Institutional Equities report warns that Indian inflation could reach 6-7% in coming quarters, above the Reserve Bank of India’s projections.
It says further rate increases may be needed, potentially taking the repo rate to 6.5-7%.
The report points to rising input costs, high household inflation expectations and price pressures spreading across more categories.
The RBI recently raised its repo rate by 25 basis points to 5.50% and shifted towards calibrated tightening.
The report also warns that higher rates and input costs could weigh on financial markets and company earnings.
- Who
- Systematix Institutional Equities issued the report. The Reserve Bank of India is the central bank whose inflation outlook and policy are discussed.
- What
- The report warns inflation could reach 6-7% and says further rate hikes may be needed.
- When
- The report was published on October 12, 2026. It discusses inflation in the coming quarters.
- Where
- India.
- Why
- The report cites rising input costs, elevated household inflation expectations, broadening price pressures and supply risks.
Systematix Institutional Equities
Reserve Bank of India
Inflation outlook
Systematix Institutional Equities
Systematix says inflation risks are significantly higher than the RBI acknowledges and could reach 6-7% in coming quarters.
Reserve Bank of India
The RBI’s latest projection puts inflation at 6% in the third quarter of FY27.
Rate policy
Systematix Institutional Equities
Systematix says additional hikes may be needed, with a terminal repo rate of 6.5-7%.
Reserve Bank of India
The RBI raised the repo rate by 25 basis points to 5.50% and shifted towards calibrated tightening.
Inflation could surprise to the upside and reach 6-7% in the coming quarters.
Restoring a real rate of at least 1% would require further hikes and a terminal repo rate of 6.5-7%, or 100-150 bps above the current 5.5%.
As this fiscal support wanes, pipeline inflation is likely to accelerate in the coming months and add to the existing momentum.
Input costs for non-financial companies rose around 40% year-on-year, while crude oil prices increased 45%.
The RBI household survey showed average inflation expectations of 9.1%.
The RBI raised its repo rate by 25 basis points to 5.50% and shifted towards calibrated tightening.
Economic Times published the report warning that inflation could reach 6-7% in coming quarters.
- Inflation outlook
- 6-7% in coming quarters, according to Systematix
- Potential terminal repo rate
- 6.5-7%
- Current repo rate
- 5.50% after a 25-basis-point hike
- Household inflation expectations
- 9.1% average in September 2026
- Input costs
- Up around 40% year-on-year in the first quarter of FY27
Sources
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