Capital Economics analyst predicts Reserve Bank of India may raise policy interest rate

Shilan Shah, an analyst at Capital Economics, said that rising inflationary pressures could lead to the Reserve Bank of India potentially raising policy rates. The CPI in May increased by 3.9% year-on-year, lower than the Reserve Bank of India's target of 4%, but at its highest level since February 2025, mainly driven by four consecutive months of rising gasoline prices. Shilan Shah warns that prices may continue to rise in the coming weeks, and supply chain disruptions will push up core inflation. Capital Economics predicts a 75 basis point interest rate hike in 2026, bringing the policy rate to 6.00%.