ICICI Bank expects the Reserve Bank of India (RBI) to begin a cumulative 50-basis-point rate hike cycle from December 2026 if crude oil prices remain elevated, according to a report cited by ANI.
However, if oil prices moderate, the tightening cycle could be delayed until April 2027.
The private sector lender said its base case scenario favours a later start to rate hikes, adding that the projection reflects its own assessment and does not represent any guidance from the central bank.
Crude Oil And Inflation To Determine RBI’s Next Move
The forecast comes after the RBI’s Monetary Policy Committee (MPC) decided to keep the repo rate unchanged at 5.25% and maintain a neutral policy stance.
The central bank also raised its FY27 GDP growth forecast to 6.7% from the earlier estimate of 6.6%. It expects quarterly growth at 7% in the first quarter, 6.4% in the second, 6.5% in the third and 6.8% in the fourth quarter.
Meanwhile, the RBI lowered its FY27 retail inflation forecast slightly to 5% from 5.1%.
ICICI Bank expects economic growth to remain stronger than the RBI’s projection, forecasting GDP expansion of 6.9% in FY27 and around 7.2% in FY28.
The bank said growth momentum remained strong, with most high-frequency indicators pointing towards healthy economic activity. It noted that concerns over global economic volatility significantly impacting India’s growth have not materialised so far.
Strong Demand Could Lead To Policy Tightening
According to ICICI Bank, strengthening domestic demand and firm core inflation excluding gold could eventually create conditions for higher interest rates.
The lender said the RBI would closely monitor economic data, particularly as growth in the second half of FY27 could moderate due to an unfavourable base effect.
Crude oil prices are expected to play a key role in determining the timing of future rate actions. Higher oil prices could increase inflationary pressures and force the RBI to begin tightening earlier, while lower prices could provide room for the central bank to maintain its current stance for longer.
ICICI Bank also expects liquidity conditions to remain supportive of economic growth. The lender said the RBI is unlikely to take aggressive liquidity-absorption measures following foreign currency non-resident deposit inflows.
