Societe Generale’s Kunal Kundu anticipates that the Reserve Bank of India (RBI) will respond to broadening inflation pressures by initiating a mini rate-hike cycle. Kundu projects a 25 basis point (bp) hike at the RBI's October meeting, with two additional 25bp increases expected in December and February [1]. While this is not Societe Generale's base case, Kundu notes there is a non-negligible risk that the RBI could opt for a larger 50bp hike instead [1].
The report highlights that headline inflation has remained above the median target for a third consecutive month, and underlying inflation is beginning to firm. This trend is narrowing the RBI's ability to overlook food-led price pressures, especially as services inflation picks up, which is seen as particularly important from a monetary policy perspective [1].
Societe Generale's outlook suggests that rate hikes could extend into early 2027, reflecting persistent inflationary concerns and a cautious approach by the RBI [1]. No immediate market reactions or analyst opinions regarding the impact on the Indian Rupee or financial markets are discussed in the article [1].
CONCLUSION
Societe Generale expects the RBI to start a mini rate-hike cycle in response to sustained inflation, with three 25bp hikes projected through February and a risk of a larger 50bp move. The outlook signals a tightening bias that could persist into 2027, reflecting ongoing inflationary pressures. Market participants should monitor RBI policy decisions closely for further signals.