Post Fed rate hike, experts see up to 50bps RBI policy tightening in CY26

RBI Repo Rate: Experts said that the key point is not the size of the increase, but the change in direction, and expect the RBI to consider 50bps hikes in both the October and December policy meetings this year

Experts said that the key point is not the size of the increase, but the change in direction, and expect the RBI to consider 50bps hikes in both the October and December policy meetings this year

After the Federal Reserve raised interest rates by 25 basis points, taking the policy range to 3.75–4 per cent, all eyes are now on the Reserve Bank of India's (RBI) upcoming Monetary Policy Committee (MPC) meeting, scheduled from October 5 to 7.

Experts said that the key point is not the size of the increase, but the change in direction, and expect the RBI to consider 50bps hikes in both the October and December policy meetings this year, which would take the repo rate to 5.75 per cent from 5.25 per cent.

For India, the Fed's outcome matters because it reduces the comfort level that the RBI had earlier, Vinit Bolinjkar, head of research at Ventura, said, adding that a narrower gap between Indian and US interest rates can keep pressure on the rupee and reduce foreign investor interest in Indian bonds. The inflation problem

On the inflation front, pressures have continued to build. Inflation has remained above the RBI’s 4 per cent target for three straight months. In August, retail inflation increased to 4.82 per cent, marking the tenth consecutive monthly rise and the highest level since December 2024. READ MORE: Federal Reserve raises interest rate by 25 bps to 3.75-4% range

Food inflation is close to 6 per cent, while core inflation has also risen gradually, suggesting price pressures are broadening beyond a few categories.