RBI may raise repo rate by 75 basis points

New Delhi The Reserve Bank of India (RBI) may continue tightening monetary policy through the first half of fiscal year 2027-28, with leading global brokerages forecasting cumulative repo rate hikes of around 75 basis points amid rising inflation risks. According to a report, brokerages including Bank of America (BofA), Goldman Sachs and UBS have warned that escalating tensions in the Middle East, energy supply disruptions and intensifying El Niño conditions could push consumer prices higher. BofA and UBS expect the RBI to raise the repo rate across monetary policy meetings during FY27, with the tightening cycle potentially extending into the first half of FY28. Their projections reflect concerns that higher energy costs and weather-related disruptions could place additional pressure on inflation. UBS expects India's headline inflation to average around 5.2 per cent in FY27 and remain above 5 per cent through the first half of FY28. The brokerage also warned that adverse weather conditions could affect global food prices, with the impact potentially emerging after a delay. It said historical evidence suggested that the effects of major weather disruptions typically materialised six to 18 months after peak conditions. With the likely peak expected between November and February, the most significant impact on global food prices could emerge during 2027 and early 2028. Inflation concerns have intensified following India's consumer price index (CPI) inflation rising to a 23-month high of 5.54 per cent in September, compared with 4.8 per cent in August. Higher food and vegetable prices were the primary drivers. Food inflation increased to 7.74 per cent in September from 5.97 per cent in August, while inflation in food and beverages climbed to 7.36 per cent from 5.66 per cent. Price pressures were more pronounced in rural areas, where inflation reached 6.08 per cent, compared with 4.88 per cent in urban areas.