RBI May Hike Rates Later This Year Amid Rising US Yields

The Reserve Bank of India (RBI) may consider raising interest rates later this year in response to higher US bond yields and rising inflation, according to Deloitte Chief Economist Rumki Majumdar.

Rising US yields are narrowing the interest-rate differential with India, which reduces the premium for global investors and could trigger capital outflows. This is a concern because foreign portfolio inflows have already been reversing following the US Federal Reserve's rate hike, says Majumdar.

The RBI has so far kept rates steady due to strong domestic credit growth and inflation not reaching a level requiring immediate intervention. However, higher US yields may force it to act to support capital flows and keep price pressures under control.