RBI may hike repo rate by 75 bps, likely to stay on tightening path through H1FY28: Brokerages

Global brokerages expect the RBI to raise the repo rate by around 75 basis points through the first half of FY28, citing Middle East tensions, energy disruptions and El Niño risks. Rising food prices pushed India’s retail inflation to 5.54% in September

New Delhi: The Reserve Bank of India is likely to stay on tightening path through H1FY28 and may hike the repo rate by around 75 basis points, according to leading brokerages.

According to the NDTV Profit report, global brokerages — including BofA, Goldman Sachs and UBS — said that the Middle East tensions, energy supply disruptions and intensifying El Nino could push headline CPI higher. BofA and UBS have forecast that the central bank will tighten monetary policy and expect around a 75-basis-point repo rate hike in MPC meetings scheduled for FY27, extending up to the first half of fiscal 2028.

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Apart from that, UBS predicted full-year headline inflation to average near 5.2 per cent in FY27, while it could cross 5 per cent through first half of FY28 due to adverse weather-related strains. “As per our global strategy team, historical evidence suggests that effects typically materialize with a lag of 6-18 months following peak weather disruption. With likely peak occurring between November and February, most significant impact on global food prices may emerge during 2027 and early 2028, adding upside risks to inflation outlook,” the brokerage forecasted.

Additionally, they flagged upside risks after India’s consumer inflation touched a 23-month high in September on surge in food prices. The report highlighted that headline Consumer Price Index inflation came at 5.54 per cent in September, up from 4.8 per cent in August, driven largely by higher food and vegetable prices.

Moreover, food inflation climbed to 7.74 per cent in September from 5.97 per cent in August, while food and beverages inflation rose to 7.36 per cent from 5.66 per cent.

Notably, rise in inflation was more pronounced in rural areas, where consumer inflation stood at 6.08 per cent in September, compared with 4.88 per cent in urban areas. CPI (General) index for combined category increased to 109.49 in September from 108.74 in August. Similarly, combined CFPI index rose to 112.17 from 110.73 during same period.