From Financialexpress · Samiran Chakraborty · · 1m 10s
RBI starts early, stays shallow
RBI's October rate hike aims for calibrated tightening to avoid steep later hikes.
In brief
RBI's October rate hike aims for calibrated tightening to avoid steep later hikes. RBI will start rate hikes early but keep them shallow to prevent steeper increases later. Originally reported by Financialexpress.
RBI monetary policy shift
The RBI's macroeconomic landscape shows resilient growth but rising inflation risks.
Global inflation pressures
Persistent geopolitical tensions and rising bond yields increase inflationary risks worldwide.
RBI inflation forecast
RBI projects headline inflation at 5.5-6.0% for FY27, risking real rates and policy credibility.
Q1FY27 growth data
Q1FY27 GDP growth at 7.8% year-on-year shows RBI has little growth sacrifice risk.
Inflation upside risks
September CPI at 5.6% year-on-year implies Q2FY27 inflation at 5.0%, 30 bps above forecast.
Inflation drivers
Diffusion index, oil prices, and crop risks add 20 bps to core inflation forecast for FY27.
RBI's stance strategy
RBI may use calibrated tightening to avoid steep hikes later, keeping cycle shallow.
Liquidity management
RBI may allow overnight rates to adjust gradually toward repo rate without aggressive withdrawal.
October policy decision
RBI likely to make 50-75 bps cumulative rate increases to keep tightening cycle shallow.
Here's the gist
RBI will start rate hikes early but keep them shallow to prevent steeper increases later.
