The US Federal Reserve’s latest rate hike may have been largely anticipated by markets, but its implications for India could be more significant. With the India-US 10-year bond yield differential near multi-decade lows, the Fed’s tighter policy stance is reducing the Reserve Bank of India’s room to pursue aggressive easing.
Garima Kapoor, Deputy Head of Research & Economist at Elara Securities, expects India could see 25–50 bps of rate hikes in 2026, with the October and December meetings likely to be key. She says rising domestic inflation, elevated crude prices, pressure on the rupee and a narrowing interest-rate differential with the US are increasingly constraining the RBI’s policy flexibility.
