Global Rate Hike Cycle Begins as Oil Prices Fuel Inflation Fears

The global economy is shifting towards tighter monetary policies as major central banks raise interest rates to combat inflation. In India, the Reserve Bank of India (RBI) may hike rates by 75-100 basis points if crude prices remain high and inflation expectations rise.

Motilal Oswal Financial Services expects an October rate hike by the RBI if crude oil prices persist above $103 a barrel. The firm has retained its forecast of a 7.0-7.2 per cent range for the 10-year Indian government bond yield through FY27, and projects FY27 CPI inflation at 5.1 per cent.

The US Federal Reserve raised its policy rate by 25 basis points in September to 3.75-4 per cent, while the European Central Bank and Bank of Japan have also moved towards tighter policy. The global economy is expected to transition from an era of abundant, inexpensive capital to a period of tighter and more expensive money.