Indian Rupee: CPI and RBI repo rate risk skew higher – MUFG

MUFG’s Michael Wan notes India’s Consumer Price Index (CPI) is expected to edge up to 4.4% year-on-year from 4.3%. Reserve Bank of India (RBI) Governor Sanjay Malhotra said inflation is largely under control, supporting expectations for rates to stay on hold near term. Wan still anticipates policy rates to rise, shifting its projected 50bps hikes to start from the December 2026 meeting.

Inflation outlook and policy timing

"In Asia, we will have India’s CPI inflation, which is expected to inch higher towards 4.4%yoy from 4.3% yoy previously."

"RBI Governor Sanjay Malhotra said at an event yesterday that inflation is “more or less under check”, and reinforcing expectations from the last policy meeting that interest rates will stay on hold for now."

"We continue to see policy rates heading higher in India, but we have pushed out the timing of our 50bps rate hikes to start from the December 2026 meeting instead."

"Nonetheless, with domestic growth in India remaining quite robust, credit growth accelerating, the lagged impact from earlier oil price increases, fiscal policy supportive with a likely wider fiscal deficit, coupled with possible interaction with adverse weather events, we think the bias of risks tilt towards the RBI repo rate moving higher from here."