RBI May Hike Rates as Hawkish Fed Narrows Rate Gap

The Reserve Bank of India (RBI) may face increased pressure to hike interest rates in October due to the US Federal Reserve's hawkish stance, according to a research report by Yes Bank.

The Fed raised its policy rate by 25 basis points to a target range of 3.75-4 per cent in a unanimous decision, and revised its 2026 inflation and growth projections higher.

This has narrowed the interest rate differential between India and the US, adding pressure on the domestic currency market and making it more likely that the RBI will raise rates in October.

The report notes that firm global crude prices, higher headline CPI in August, and a rise in core inflation could provide the basis for an RBI move.