RBI to keep tightening risks alive – MUFG

FXStreetOct 2, 2026 2:28 PM

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MUFG analysts Lin Li, Michael Wan, Lloyd Chan and Khang Sek Lee highlight that Asia FX will be driven by the Reserve Bank of India’s (RBI) finely balanced decision on 7 October. They expect RBI to keep rates on hold but stress that a hiking cycle from December is likely, with a total of 50–75bps of tightening and a shift away from a neutral stance.

RBI path and policy outlook

"We are officially forecasting RBI to keep rates on hold, but more importantly we have already been calling for the central bank to start its hiking cycle from December so ultimately we think it’s just a matter of time before policy rates move higher."

"We see a good chance RBI will also move its stance away from neutral to signal a tightening bias."

"We have 50bps of rate hikes in our forecast profile, and have mentioned that there could be a risk of 75bps in total this cycle, given that growth is strong, liquidity is abundant, credit growth is picking up, fiscal policy is supportive, while higher commodity prices and adverse weather conditions lend inflation risk to the upside in India."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

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