The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) began its three-day meeting on Monday amid growing expectations of the central bank’s first interest rate hike since 2023. Investors are increasingly betting that policymakers will begin tightening policy as inflation quickens, growth remains resilient, and major central banks turn more hawkish.
With inflation running above the RBI’s target and markets already pricing in higher borrowing costs, the central bank’s decision and guidance will be closely watched for signals on the trajectory of rates and capital flows. A benign inflation backdrop earlier in the year had given the RBI room to hold rates even as the Iran war drove oil prices higher, but inflationary pressures have since broadened beyond food and fuel.
