RBI May Hike Rates Later This Year Amid US Yield Surge

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

Majumdar said that higher 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 as strong foreign portfolio inflows were already reversing after the US Federal Reserve's rate hike.

The RBI has been hesitant to raise rates due to strong domestic credit growth, but Majumdar said that 'the question is when' they might act. She suggested that it may not be in October, but possibly later in the year in December. The central bank would consider a rate hike to ensure inflation remains under control and capital flows stay anchored.

Majumdar expects crude prices above USD 100 a barrel to be temporary, with prices eventually normalising at USD 80-90 as geopolitical uncertainty eases. She also projected that India's economic growth will remain strong, raising projections from an earlier 6.7% to 7.1-7.4% for the full year.