The Reserve Bank of India is now expected to implement a more aggressive tightening cycle than previously forecast, according to revised projections from Societe Generale. Economist Kunal Kundu has upgraded his outlook to three quarter-point rate hikes totaling 75 basis points, up from an earlier prediction of two hikes. This would lift the benchmark repo rate from the current 5.25% to 6.00% by early 2027.
The shift in expectations comes as India’s stronger-than-anticipated economic growth provides the central bank with greater latitude to continue its fight against inflation without derailing expansion. The extended tightening timeline suggests the RBI remains concerned about persistent price pressures despite recent moderation.
Traders in Indian rupee pairs should prepare for a potentially stronger currency trajectory as higher interest rates typically attract foreign capital inflows. The revision also signals tighter liquidity conditions ahead for Indian markets, which could impact corporate borrowing costs and equity valuations through the forecast period.
FXnCO Insight
Position for a firmer rupee and repricing of Indian rate-sensitive assets as the RBI’s extended tightening cycle gains momentum through 2027.
Source: FXStreet