The Reserve Bank of India is likely to raise the repo rate to 6.25 per cent by the first half of 2027, implying cumulative monetary tightening of 100 basis points in the current cycle, as persistent inflationary pressures and resilient economic growth warrant a tighter policy setting, according to a Deutsche Bank report cited by news agency ANI on Tuesday.

Source: ANI via Latestly

Deutsche Bank expects a 25-basis-point hike in December 2026, followed by another 50 basis points of tightening in the first half of 2027 — a forecast it described as more hawkish than market consensus. Yaani (in simple terms): the repo rate, already raised to 5.50 per cent in October, would climb a further three-quarters of a percentage point, making fresh loans costlier if the forecast holds.

Source: Deutsche Bank report via TradingView News

6.25%Repo rate Deutsche Bank expects by the first half of 2027
25 bpsHike expected in December 2026, with 50 bps more in early 2027
6%Projected average CPI inflation for October–December 2026

The report projects consumer price inflation to average 6 per cent in October–December 2026, 5 per cent in FY27 and 4.7 per cent in FY28, and flags upside risks if domestic fuel prices are raised after Diwali, while wholesale inflation above 11 per cent could pass further costs on to consumers. Household inflation expectations have risen to 10 per cent from 8 per cent before the West Asia conflict, raising the risk of second-round price pressures, the report said.

On growth, Deutsche Bank still expects India's real GDP to expand by more than 7 per cent in both FY27 and FY28, though momentum could moderate in the second half of FY27 because of higher oil prices, a below-normal monsoon and an adverse base effect from last year's GST rate cuts. It also flagged risks to the rupee: despite recent RBI measures that helped the currency recover to around Rs 94.50 against the US dollar, foreign exchange reserves have fallen by around USD 60 billion — yaani roughly Rs 5.7 lakh crore in value — from their early-September peak of USD 786 billion.

The forecast is a projection by one bank's research team, not an RBI decision. Other forecasters are also positioned for more tightening: SBI Research has maintained its call for a 50-basis-point hike in December, and Barclays has put its terminal-rate forecast at 6 per cent for this cycle, according to recent reports. The RBI's next monetary policy decision will depend on incoming inflation and growth data.