RBI May Hike Interest Rates as Early as October Amid US Fed's Hawkish Stance

The Reserve Bank of India (RBI) may be forced to raise interest rates as early as October due to the US Federal Reserve's hawkish stance and a narrowing interest rate differential between the two countries, according to a research report by Yes Bank.

The probability of an RBI rate hike in October has increased, although the central bank's decision will continue to depend on domestic growth and inflation dynamics, the report said. Firm global crude prices, higher headline CPI in August, and a rise in core inflation could provide the basis for an RBI move.

However, the effectiveness of any rate hike could depend on the RBI's ability to absorb surplus liquidity, with the weighted average call rate (WACR) currently at 5.05 per cent, Yes Bank said.