HSBC and JPMorgan Forecast 25bps RBI Rate Hike to 5.5% with Hawkish October Guidance

The Quick Take

• HSBC expects the RBI to hike the repo rate 25bps to 5.5% in October, with a second hike in December forecasted
• September CPI inflation is projected to rise to ~5.5% from 4.8% in August, validating the hawkish hiking case
• JPMorgan also anticipates an October hike with hawkish guidance from Governor Sanjay Malhotra

HSBC expects the Reserve Bank of India to raise the repo rate by 25 basis points to 5.5% at its October 2026 Monetary Policy Committee meeting, followed by another 25bps hike in December, according to NDTV Profit. The bank's forecast is underpinned by an expected rise in September CPI inflation to approximately 5.5%, up from 4.8% in August, primarily driven by food price pressures and the pass-through of higher global crude oil prices. JPMorgan also anticipates a rate hike in October, with hawkish guidance from Governor Sanjay Malhotra expected to accompany the decision regardless of specific rate quantum.

The HSBC and JPMorgan forecasts align with a broader market consensus that the RBI has shifted to a more hawkish footing in response to stubborn above-target inflation and rising global energy prices. A 25bps hike to 5.5% would put the repo rate at its highest level since the pre-pandemic era, with the hawkish signaling of a December follow-through implying a terminal rate potentially above 5.75%. For Indian banking stocks, the rate hike cycle is broadly positive for net interest margins — particularly for banks with large repo-linked loan books — but creates headwinds for highly leveraged borrowers and rate-sensitive sectors.

The immediate forward catalyst is the RBI Governor's October announcement, where both the rate decision and the forward guidance tone will drive immediate market reactions. The September CPI print — expected around 5.5% — is the data point that will either confirm or complicate HSBC's hiking thesis: a surprise decline below 5% would reduce the hiking urgency. The macro variable is whether the global commodity price cycle, particularly crude oil above $100, sustains into year-end, as energy-driven inflation is the most politically difficult for the RBI to address through rate hikes alone without risking a growth slowdown.

Synthesized from 1 source.