RBI May Hike the Repo Rate Twice by December as Inflation Stays Sticky, Says Templeton’s Kiran Sebastian

Kiran Sebastian, Templeton: CPI at 4.8%, could reach 5.5%, staying above 5% for quarters. RBI may hike repo rate twice by December.

The Reserve Bank of India may raise the repo rate twice by December as inflation remains stubbornly elevated, according to Kiran Sebastian of Franklin Templeton, speaking to Moneycontrol’s Daily Voice column.

Sebastian’s inflation outlook is specific: CPI currently stands at 4.8 percent, with several forecasts pointing to a move toward 5.5 percent and inflation staying above 5 percent for the next few quarters, a trajectory he argues strengthens the case for the RBI to act rather than continue its extended policy pause.

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Why Sebastian Expects Two Rate Hikes Rather Than One

Sebastian’s call for two hikes by December, rather than a single larger move, reflects a calibrated approach to tightening, allowing the RBI to assess the impact of an initial move before deciding on a second, a sequencing pattern several other economists have also floated for the central bank’s upcoming Monetary Policy Committee meetings.

This two-step approach contrasts with more aggressive single-move forecasts from some other brokerages, illustrating that while there is now broad consensus that the RBI’s rate pause is ending, meaningful disagreement remains on the specific size and pacing of the tightening that follows.

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The Inflation Trajectory Behind This View

Sebastian’s specific inflation figures, CPI currently at 4.8 percent with forecasts pointing toward 5.5 percent, describe a trajectory that would take inflation meaningfully above the RBI’s comfort zone if it plays out as projected, since price pressures staying above 5 percent for several quarters would represent a sustained breach rather than a brief, transient spike.

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This kind of durable, rather than temporary, inflation overshoot is typically what prompts central banks to move from a wait-and-watch stance to active tightening, since a genuinely temporary spike driven by one or two volatile categories would more often be looked through rather than acted upon.

How This View Fits the Broader RBI Rate Hike Debate

Sebastian’s comments add to an increasingly crowded field of economists and fund managers now projecting an RBI repo rate hike in the coming months, following similar calls flagging risks from elevated crude oil prices, a broadening inflation basket, and rupee pressure tied to global monetary policy shifts.

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With multiple, independently arrived-at forecasts now converging on the same broad conclusion, even as the specific size and timing estimates vary, investors should treat the direction of RBI policy, toward tightening rather than continued easing, as the more settled part of this debate, with the pace and magnitude remaining the open questions heading into the next Monetary Policy Committee meetings.

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Conclusion

Kiran Sebastian’s view that the RBI could hike the repo rate twice by December, driven by inflation staying above 5 percent for several quarters, adds a specific, data-grounded forecast to a broader chorus of economists now expecting tightening ahead. Investors should track upcoming CPI prints and Monetary Policy Committee commentary for confirmation, and should consult a SEBI-registered investment adviser before repositioning portfolios around rate expectations.

FAQs

What did Kiran Sebastian say about the RBI repo rate?

Ans. Kiran Sebastian of Franklin Templeton said the RBI may hike the repo rate twice by December as inflation stays sticky.

What is the current level of CPI inflation according to this view?

Ans. CPI currently stands at 4.8 percent, with forecasts indicating it could move toward 5.5 percent and stay above 5 percent for the next few quarters.

Why does Sebastian expect two rate hikes rather than one?

Ans. A two-step, calibrated approach allows the RBI to assess the impact of an initial hike before deciding on a second, a sequencing several other economists have also floated.

Who is Kiran Sebastian?

Ans. Kiran Sebastian is associated with Franklin Templeton and shared this view in Moneycontrol’s Daily Voice column.

Is there broad agreement on the size of the expected RBI rate hikes?

Ans. No. While there is now broad consensus that the RBI’s rate pause is ending, forecasts vary on the specific size and pacing of the tightening that follows.

What is driving the broader consensus toward RBI rate hikes?

Ans. Elevated crude oil prices, a broadening inflation basket, and rupee pressure tied to global monetary policy shifts have all been cited by various economists as factors supporting the case for tightening.