Experts see RBI stance change to ‘Calibrated Tightening’ as a mild surprise; expect 2-3 more rate hikes in current cycle

The Reserve Bank of India’s (RBI) shift in its policy stance from ‘Neutral’ to ‘Calibrated Tightening’ came as a mild surprise to economists, with some expecting another 2-3 rate hikes in the current cycle as the central bank seeks to contain inflationary pressures amid elevated crude oil prices and global financial volatility.

The RBI’s Monetary Policy Committee (MPC) on Wednesday unanimously raised the benchmark repo rate by 25 basis points to 5.5%, marking the first rate hike since February 2023. The change in stance was backed by a 4-2 majority.

The central bank had last cut the repo rate by 25 basis points in December 2025, bringing it down from 5.50% to 5.25%. It had kept policy rates unchanged and retained its neutral stance in the three bi-monthly policy reviews of FY27, held in April, June and August 2026.

Experts see further rate hikes

“The rate hike was expected, but the stance change was a mild surprise,” said Umesh Sharma, CIO – Debt at The Wealth Company Mutual Fund. He expects 2-3 more hikes in this cycle, with inflation remaining above the central bank’s target and global yields continuing to rise.

“The MPC delivered a 25bp rate hike in line with expectations, with a surprise shift in stance towards recalibrated tightening. We continue to see 25-50bp of additional rate hikes going ahead, with further upside if global risks persist,” said Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank.

Garima Kapoor, Deputy Head of Research and Economist at Elara Capital, expects the RBI to raise rates by another 50 basis points in this cycle.

“Continuing commodity price pressures are likely to put upside pressure on inflation as growth remains resilient, allowing quick pass-through of input prices to retail prices. The rising interest rate backdrop globally has also reduced RBI’s degrees of freedom. We see likelihood of another 50 bps hike this cycle,” she said.

Basant Bafna, Head – Fixed Income at Mirae Asset Mutual Fund, expects one more rate hike in December, describing the current cycle as shallow. He said the RBI’s upward revisions to growth and inflation supported its reaction function, with firmer growth lowering the cost of tightening while supply-led price pressures from crude and El Niño increasing the risk of second-round effects.

“The rate decision was unanimous, whereas the change in stance was passed with a majority of 4-2,” Bafna said, adding that the RBI appeared to have kept its options open on liquidity rather than opting for front-loaded tightening.

Crude, inflation remain key risks

Sujan Hajra, Chief Economist & Executive Director at Anand Rathi Group, said the rate hike was a “touch-and-go decision” shaped by resilient domestic growth, rising food prices, elevated global crude prices, higher bond yields and rupee depreciation.

However, he cautioned that the shift in stance does not necessarily signal a prolonged series of rate hikes, with the RBI retaining room to pause depending on the evolution of inflation and external pressures.

Vijay Kuppa, CEO of InCred Money, said the 25-basis-point hike marked a shift from the prolonged easing cycle to a more cautious monetary policy environment. While the move was largely anticipated, he said the direction of crude prices, inflation and the rupee over the coming months would determine whether the hike remains a one-off adjustment or marks the beginning of broader monetary policy normalisation.

Rahul Goswami, CIO & MD, India Fixed Income at Franklin Templeton, said the 25-basis-point hike reflected a calibrated balancing of inflation risks against an increasingly uncertain global financial environment. He said the move should help reinforce policy credibility and anchor inflation expectations amid higher food and commodity prices.