The Reserve Bank of India (RBI) may have to return to monetary tightening in the second half of FY27 as strong economic activity, elevated inflation risks and a surge in banking-system liquidity create fresh policy challenges, according to an assessment by Union Bank of India (UBI). UBI expects the central bank to potentially lift the repo rate by 50-75 basis points from its current 5.25 per cent level. The anticipated increase could come through two or three hikes of 25 basis points each, taking the benchmark rate to a range of 5.75-6 per cent.
\n\nThe bank's base-case view places the beginning of the potential tightening cycle in December, although it has not completely ruled out an earlier move depending on global developments and domestic liquidity conditions.
\n\nThe outlook reflects a combination of factors that could put pressure on the RBI to recalibrate its monetary policy stance. Strong economic growth, a possible pickup in inflation and tighter financial conditions globally are among the key considerations highlighted by UBI.
\n\n“Rate hikes are back on the table for H2 FY27,” the report said, adding that December appears to be the more likely starting point in its base-case scenario.
\n\nThe assessment marks a shift…
Original source: https://www.timesnownews.com/business-economy
