Fed Rate Hike Puts Pressure on India to Tighten Monetary Policy

The US Federal Reserve's interest rate hike has put pressure on India to follow suit and tighten its monetary policy, amid rising inflation.

Economists expect the Reserve Bank of India (RBI) to increase the local policy rate by 25 basis points, with some predicting a shallow hiking cycle of 50-75 basis points.

The RBI last changed the repo rate in December 2025, when it was reduced by 25 bps to 5.25%.

India's retail inflation measured by Consumer Price Index has been above 4% for three consecutive months, with food price inflation jumping to 6% and core inflation rising to 4.2%.