Repo rate seen peaking at 6% as December hike odds rise: MPC minutes analysis

Two external members favoured retaining the neutral stance, while most members emphasised that the change did not signal a series of hikes. Instead, it indicated that rate cuts were off the table for now, with the future policy path allowing for further increases or a pause, according to Barclays India.

Barclays forecasts FY27 CPI inflation at 5.2%, in line with the RBI’s projection, before easing to 4.9% in FY28. Core inflation is expected at 4.2%, below the MPC’s 4.4% projection, suggesting second round price effects and demand side pressures remain relatively contained. MPC members differed on whether inflationary pressures were spreading beyond supply shocks, with some citing rising wholesale prices and resilient demand. The brokerage does not expect outsized rate hikes to defend the rupee in 2026, anticipating greater reliance on non rate measures to manage currency and liquidity pressures.

The likelihood of another interest rate hike in December has increased following the Reserve Bank of India ’s October monetary policy meeting, with the repo rate expected to peak at 6% in the current tightening cycle . The forecast implies another 50 basis points of tightening, although the cycle is expected to remain shallow as underlying inflation pressures remain relatively contained. The RBI’s Monetary Policy Committee unanimously raised the repo rate by 25 basis points at its October 5 to 7 meeting and shifted its stance to calibrated tightening from neutral. Two external members favoured retaining the neutral stance, while most members emphasised that the change did not signal a series of hikes.

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