RBI Expected to Kick Off Rate Hike Cycle as Inflation Broadens, Peers Turn Hawkish

MUMBAI — The Reserve Bank of India is widely expected to raise its benchmark repo rate by 25 basis points at its October 7 policy meeting, ending nearly four years without a hike as inflation broadens beyond food and fuel. Nearly 60% of economists polled by Reuters — 35 of 61 — expect the increase, while swap markets have fully priced in a move. If delivered, the hike would lift the repo rate from 5.25%, where it has held for nearly 10 months. Consumer inflation rose to 4.82% in August, above the RBI's 4% medium-term target for a third consecutive month, with prices across nearly half the CPI basket rising at or above target. The economy grew 7.8% in the April-June quarter. Major central banks, including the Federal Reserve and Bank of Japan, have raised rates over the past seven months. Economists at Nomura and Barclays project 25-50 basis points of tightening, while ANZ, BofA and Goldman Sachs expect 75-100 basis points. Swap markets price about 100 basis points of hikes over 12 months.