RBI MPC Minutes Signal More Repo Rate Hikes, Economists Expect 50 Bps Increase In December Amid Rising Inflation Risks

Mumbai: Economists expect the Reserve Bank of India (RBI) to continue raising interest rates in December after the October Monetary Policy Committee (MPC) minutes revealed growing concerns over inflation and a shift towards tighter monetary policy.

The RBI had increased the repo rate by 25 basis points during its October meeting and changed its policy stance to 'calibrated tightening', signalling caution over emerging inflationary pressures.

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According to SBI Research, the RBI could introduce monetary tightening equivalent to 50 basis points in December. This could involve a direct 50-basis-point repo rate hike or a combination of a 25-basis-point increase and adjustments to the Liquidity Adjustment Facility (LAF) corridor.

Dr Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI, said rising inflation and persistent rupee weakness required close monitoring.

He expects inflation to peak below 6.5 per cent by November.

RBI MPC Minutes Reveal Hawkish Policy Shift

Radhika Rao, Senior Economist at DBS Bank, said the October MPC minutes indicated a clear shift towards tighter monetary conditions. Committee members highlighted strong economic growth and widening inflationary pressures as reasons for raising interest rates. While some members favoured preventive action, others supported gradual rate increases without committing to prolonged tightening.

RBI Repo Rate Outlook For December

RBI Governor Sanjay Malhotra highlighted concerns about inflation spreading across different sectors. With inflation projected to approach 6 per cent during the October-December quarter, economists believe another repo rate hike remains possible in December.

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Meanwhile, the Indian rupee has appreciated approximately 1.5 per cent against the US dollar this month, supported by foreign exchange regulations and IPO-related inflows.

However, elevated crude oil prices and global uncertainty continue to pressure bond markets.

Economists expect bond yields to remain elevated as investors assess inflation risks, monetary policy decisions and developments in global oil markets.