S&P expects RBI to raise its policy rate by 25 bps in the current fiscal year

In its Economic Activity for Asia Pacific report, S&P notes that CPI inflation has risen because of higher energy prices, but it is generally manageable. Higher oil prices are likely to push up inflation modestly. Food prices could also rise more due to El Ni?o. However, preparedness measures will prevent acute supply crunches and limit the macro impact. Depreciation pressure on Asia-Pacific currencies has abated over the third quarter, following significant weakening in the first half of 2026, S&P noted. The majority of Asia-Pacific currencies are still weaker against the U.S. dollar that at the start of the year.

Further, the rating agency anticipates some central banks will further increase policy rates this year to contain inflation and support exchange rates. In its baseline outlook, where the inflation and exchange rate pressures are not severe, it expects the tightening to be modest. S&P sees a 25 bps increases in the rest of 2026 in some countries including India. For India, S&P expects the balance of considerations to shift toward higher interest rates. Factors supporting this shift include solid growth, persistent inflationary pressures, an unresolved conflict in West Asia, and weather-related risks. They expect consumer inflation to average 5.1% and the Reserve Bank of India to raise its policy rate by 25 bps in the current fiscal year.

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