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RBI resumes tightening cycle, lifting repo rate to 5.50%
Commerzbank says the RBI raised its FY2026-27 CPI forecast to 5.2%, and signaled the next step could be either another hike or a pause, but not rate cuts near term.
RBI has restarted its tightening cycle, raising the repo rate by 25 basis points to 5.50% and shifting its policy stance to “calibrated tightening,” according to a Commerzbank note cited by FXStreet. FXStreet reports the move was pre-emptive, intended to curb rising inflation expectations despite resilient growth, with the central bank voting 4-2 to change the stance from neutral. Commerzbank’s Charlie Lay said RBI still sees limited demand-side inflation pressure, but pointed to broader price pressures, including higher food and energy costs. Lay also flagged that while the action could be supportive for the Indian rupee at the margin, near-term currency moves are likely to be driven by factors including oil, US yields, the US dollar, and portfolio flows. He added that RBI emphasized the tightening path is data-dependent, with the next policy move either a hike or a pause. FXStreet further notes that RBI lifted its FY2026-27 CPI forecast to 5.2% from 5.0%, with inflation projected to reach 6.0% in Q4 2026, implying rate cuts are off the table near term.