Indian Rupee: RBI seen keeping hike option open – DBS

DBS Group Research anticipates India’s September inflation to rise to 5.7% year-on-year from 4.8%, driven by broad-based food price gains and higher non-food fuel costs. Core inflation is expected to tick up as uneven monsoon conditions and elevated Oil prices add pressure, leading DBS to expect the RBI to keep the door open for a possible rate hike in December 2026.

Higher headline CPI and policy implications

"September inflation is likely to gather momentum to 5.7% y/y, partly driven by base effects, from 4.8% the month before."

"Food segments continue to register gains, with pressures broadening to include perishables, edible oils, rice, pulses, sugar, etc., according to high-frequency data."

"Core inflation is also likely to tick up, aligning with the central bank's view that price risks are no longer benign."

"Pressures have built up due to the overhang of an uneven and sub-par monsoon, drought conditions in parts of the country, and elevated oil prices."

"In the face of higher headline prints, we expect the RBI to keep the door open for another rate hike in December 2026."

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