RBI Rate Hike Cycle Likely to Continue, HDFC Bank Expects Further 50-75 bps Increase

Srinagar: The Reserve Bank of India’s latest rate hike is likely to mark the beginning of a tightening cycle, with analysts expecting another 50-75 basis points of cumulative increases over the coming months.

The RBI has raised its FY27 growth forecast by 40 basis points to 7.1%, while increasing its inflation forecast to 5.2%. Analysts expect inflation to average 5.4% in FY27, with 6.3% projected for the current quarter.

The pace of further rate hikes could depend on the duration of the West Asia conflict and its impact on oil prices. The RBI is also expected to manage surplus liquidity through measures including sell/buy swaps, VRRRs and, if required, OMOs.

Analysts expect the bond yield curve to flatten as higher policy rates and liquidity normalisation push up short-term rates.[KNT]