RBI likely to tighten policy amid sticky inflation and global rate hikes

The Reserve Bank of India’s August meeting resulted in a steady repo rate of 5.25% and a unanimous neutral outlook, reflecting vague expectations due to monsoon, El Niño and geopolitical uncertainty. However, the subsequent MPC minutes signaled that any materialisation of higher food, fuel or input prices could force a policy tightening. Internationally, the Fed, ECB and Bank of Japan have all increased rates, while the Bank of England paused amid domestic slack.

India’s economy posted 7.8% real GDP growth in Q1 FY27, with strong corporate margins and 18.1% credit growth, prompting several rating agencies to lift growth forecasts. At the same time, the rupee weakened to its lowest in two months, bond yields rose, and foreign portfolio investors have withdrawn roughly Rs 3 trillion from equities, underscoring heightened market sensitivity to future RBI moves.