HSBC Economist Forecasts Two More RBI Rate Hikes as Export-Driven Inflation Persists

Quick Take

• HSBC chief economist Pranjul Bhandari forecasts two additional RBI rate hikes, diverging from consensus.
• Export-driven growth thesis creates inflationary pressures distinct from domestic consumption channels.
• Hawkish HSBC call pressures rate-sensitive sectors and may steepen India's short-end yield curve.

HSBC's chief economist for India, Pranjul Bhandari, staked out a notably hawkish position on the Reserve Bank of India's policy trajectory Wednesday, forecasting two additional rate hikes even as market consensus has largely pivoted to expecting the beginning of an easing cycle. Bhandari's export-driven growth thesis argues that India's economic expansion is increasingly powered by external demand — creating inflationary risks distinct from the domestic consumption channels that traditional monetary models emphasise, necessitating a tighter policy stance than prevailing consensus allows.

The HSBC forecast represents a significant divergence from mainstream India macro economists, the majority of whom anticipate the RBI's Monetary Policy Committee to initiate rate cuts by early 2027 as headline inflation trends toward the 4% target. Bhandari's two-hike call implies that core services inflation — which has proven stickier than goods inflation through the current cycle — requires additional monetary restriction to anchor expectations, particularly given the inflationary impulse from wage growth in the IT and financial services sectors.

For interest rate-sensitive sectors including banking, NBFCs, housing finance, and real estate, the HSBC forecast adds uncertainty to earnings projections that assume an accommodative monetary environment in the near term. Bond markets will interpret the research as a cautionary signal, potentially steepening the yield curve at the short end. The RBI's next policy meeting will be watched closely for any shift in communication that validates or undercuts the HSBC thesis on export-driven inflationary pressures.

Sources (1 source): CNBC TV18 Markets | market.news automated synthesis | v6.34