EP04: The rate view just turned

A year ago, India's inflation printed at a quarter of one per cent — the lowest reading on record. The only question in the market was how many more rate cuts were coming. Fifty-nine out of seventy economists polled in January expected the central bank to hold. Not one of them forecast a rise.

Yesterday, the government paid five point two per cent to borrow for three months, and five point nine to borrow for a year.

This episode asks what happened in ten months to move a rate-cutting story to a rate-hiking one — and what two named members of the rate-setting committee have said about it, in writing, in a published document.

Then it splits into the two things that actually reach a treasury desk. What the T-bill curve is paying us to do with cash today. And why a hike, if it comes, may not reach our own borrowing costs on the day it happens — because most corporate lending in India sits on a benchmark that moves on its own schedule, not the market's.

Including the honest caveat: the committee held in August, the central bank's own inflation forecast came down, and the reasons behind all of this are mostly not Indian at all.

Personal views. Not investment advice.

SOURCES

• India CPI inflation — record low of 0.25% in October 2025; 4.45% in July 2026, highest since December 2024

• RBI Monetary Policy Committee minutes, 19 August 2026 — Deputy Governor Poonam Gupta and Governor Sanjay Malhotra

• Reuters poll, January 2026 — 59 of 70 economists expected a hold at the February meeting

• Treasury bill auction, 9 September 2026 — 91-day 5.2089%, 182-day 5.6174%, 364-day 5.9148%

• RBI repo rate 5.25% since 5 December 2025; 125bps of cuts across 2025

• Reported EBLR transmission ~85-95% vs MCLR ~40-60% in six-month windows

Figures are as reported. Check against the underlying data before relying on them.