Inflation and FX concerns make August hike likely

In contrast to the majority of analysts who are expecting no change, we think the Reserve Bank of India (RBI) will hike the repo rate by 25bp to 5.50% at the conclusion of next week’s Monetary Policy Committee (MPC) meeting on Wednesday 5th August. After all, rising inflation has reduced the scope for policymakers to remain on the sidelines, while the renewed weakness in the rupee will be a factor too. In all, we expect the repo rate will rise to 6.00% by early 2027.