RBI repo rate hike on or off? S&P sees 5.5%, Fitch projects 5.75% in 2027

The prospect of a Reserve Bank of India (RBI) rate hike has returned to focus as global rating agencies flag stronger growth, persistent inflation and geopolitical risks. S&P Global Ratings expects one 25-basis-point hike in FY27, while Fitch Ratings sees two increases, taking the policy rate as high as 5.75% in early 2027.

The outlook is also gaining support domestically. SBI Research has recommended two consecutive 25-bps rate hikes in October and December, citing elevated crude oil prices, external shocks and emerging inflationary pressures.

The RBI kept the repo rate unchanged at 5.25% since its August policy meeting, marking the fourth consecutive meeting without a change. The Monetary Policy Committee (MPC) is scheduled to meet from October 5-7, 2026.

S&P sees one rate hike

S&P Global Ratings expects the RBI to raise its policy rate by 25 bps to 5.5% during the current fiscal year. The agency said the balance of considerations was shifting towards higher interest rates, pointing to solid economic growth, persistent inflationary pressures, the unresolved conflict in West Asia and weather-related risks.

S&P has raised its FY27 GDP growth forecast for India to 7% from 6.6%, following stronger-than-expected June-quarter growth. However, it expects inflation to average 5.1% during FY27, slightly above the RBI's 5% forecast.

The agency also warned that growth could moderate in the second half of the fiscal year as the benefits from GST rationalisation and income-tax cuts fade.

Fitch sees two hikes

Fitch Ratings has a more aggressive rate trajectory. It expects the RBI to raise the repo rate by 25 bps in October to 5.5%, followed by another 25-bps increase in early 2027 to 5.75%.

The rating agency expects rates to subsequently ease back to 5.5% in 2028.

Fitch cited the combination of strong demand, rising prices and adverse supply developments. It expects retail inflation to increase in the short term, reaching 5.5% in December, compared with 4.82% in August.

Fitch has also raised India's FY27 growth forecast to 6.9% from 6.4%, although it expects momentum to moderate during the remainder of the fiscal year.

RBI Repo Rate History: 2020–2025

SBI Research sees October, December hikes

The domestic outlook from SBI Research points in the same direction. It has recommended a 25-bps hike in October followed by another 25-bps increase in December, arguing that the case for monetary tightening has strengthened significantly.

The report highlighted crude oil prices crossing $100 a barrel amid heightened geopolitical uncertainty. It estimated that crude could rise to $123 a barrel over the next 15 days.

SBI Research warned that if crude remains elevated, inflation could approach 6.5% in October and November. It also flagged higher input costs in restaurants, edible oil and LPG.

The report said its rate-hike recommendation was based on evolving domestic and external economic conditions and was independent of any expected US Federal Reserve action.

Taken together, the forecasts indicate a significant shift in the interest-rate debate: stronger-than-expected growth is increasingly being accompanied by concerns over inflation and imported price pressures, potentially putting the RBI in a position where supporting price stability takes greater priority in the months ahead.