UOB’s Jester Koh anticipates that the Reserve Bank of India (RBI) will implement two consecutive 25 basis point rate hikes, beginning with the December 2026 Monetary Policy Committee (MPC) meeting, in response to mounting inflation risks. This expectation is based on projections that headline inflation will exceed the upper end of the RBI’s 2–6% tolerance band by the third quarter of fiscal year 2027 (October–December 2026) and remain above 6% until early in the first quarter of fiscal year 2028, which could result in negative real rates and necessitate tighter monetary policy to curb demand-driven inflationary pressures [1].
Key drivers behind this outlook include strengthening food inflation, rising household inflation expectations, and the hawkish tone observed in the August RBI MPC meeting minutes. Koh notes that while current price pressures are concentrated in the food component, the RBI cannot ignore these developments due to the high frequency of food consumption and its significant influence on household inflation expectations, which have increased notably since the start of 2026 [1].
The August RBI MPC meeting minutes were assessed as hawkish, with several committee members indicating a possible shift towards rate hikes. These members expressed a 'wait-and-see' approach before recalibrating the policy rate, suggesting that further tightening could be on the horizon if inflationary pressures persist [1].
No immediate market reaction or analyst opinions beyond UOB’s projections are discussed in the source article [1].
CONCLUSION
UOB projects that the RBI will respond to rising inflation risks with two 25bps rate hikes starting in December 2026. The outlook is driven by persistent food inflation, elevated household inflation expectations, and a hawkish shift in RBI communications. Market participants should monitor inflation trends and RBI policy signals closely.