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Below the Quote on US Fed rate hike by Rajeev Sharan, Head - Criteria, Model Development & Research Brickwork Ratings

"The US Federal Reserve has raised rates by 25 basis points to 3.75 to 4%, its first hike since 2023, and has signalled it may not be done this year. For India, the immediate effect runs through bond yields and the rupee. With US 10-year yields breaching 5% and a strengthening dollar, we are seeing pressure on the rupee, which is currently hovering close to the 96 mark. This depreciation, compounded by Brent crude remaining elevated above USD 108 per barrel, exacerbates imported inflation and nudges domestic bond yields higher. Going into the October review, we expect RBI to hold the repo rate at 5.25% and maintain a watchful stance. A rate reduction looks unlikely until the external picture, the rupee, oil and global rates, turns more favourable, and if these pressures persist, a prolonged pause, and even a tightening bias, cannot be ruled out."

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