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Morgan Stanley Sees RBI Rate Hikes Starting at October Meeting
Morgan Stanley thinks India’s central bank may start raising interest rates in October.
It expects the first increase to be 25 basis points.
Three more increases of the same size could follow.
Together, these moves would raise rates by 1 percentage point.
Morgan Stanley is worried because inflation, oil prices and US borrowing costs are rising.
It also expects India’s economy to keep growing strongly.
The higher rates are meant to help control inflation and support the rupee.
However, the central bank may not need to make all the predicted increases if oil prices or global financial pressures fall.
The RBI’s policy meeting is scheduled to end on October 7.
Morgan Stanley expects the Reserve Bank of India to raise its repo rate by 25 basis points on October 7.
The brokerage forecasts three additional 25-basis-point hikes, taking cumulative tightening to 100 basis points.
It expects the repo rate to reach 6.25% by April 2027, with the policy stance unchanged in October.
Rising inflation, crude oil prices, US bond yields and resilient growth prompted Morgan Stanley to bring forward its forecast.
The brokerage says the hikes would represent policy normalisation, but a reversal in oil prices or global financial conditions could reduce the need for the full cycle.
- Who
- Morgan Stanley and the Reserve Bank of India’s Monetary Policy Committee.
- What
- Morgan Stanley forecasts a 25-basis-point repo-rate hike followed by three additional hikes.
- Where
- India.
- When
- The MPC meeting is scheduled for October 5–7, with the policy decision due on October 7.
- Why
- Rising inflation, higher crude oil prices, tighter global financial conditions and resilient economic growth are driving the forecast.
Key facts
- Expected October hike
- 25 basis points
- Projected cumulative hikes
- 100 basis points across four consecutive meetings
- Projected repo rate
- 6.25% by April 2027
- September CPI forecast
- Around 5.7%
- FY27 CPI forecast
- 5.3%, raised from 5%
- FY27 GDP growth forecast
- 7.3%
- Meeting dates
- October 5–7, ending with the policy announcement on October 7
Quotes
Morgan Stanley
Brokerage providing the monetary-policy and economic forecasts cited in the article
“the rate hike cycle primarily as policy normalisation rather than disruptive tightening, aimed at re anchoring real rates, containing second-round inflation risks, preserving inflation expectations, and supporting external stability.”
financialexpress.com
Sources
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