Two major central banks warned this week that interest rates could rise further, as inflation remains stubbornly above targets. The European Central Bank is likely to raise rates at its June meeting, ECB board member Frank Demarco said, while Standard Chartered predicted the Reserve Bank of India may hike in early FY27.
Speaking in Frankfurt, Demarco emphasized that services inflation and wage growth in the Eurozone are still too high. A quarter-point move in June would lift the ECB deposit rate to 4.25%. Meanwhile, Standard Chartered economists pointed to persistent food and core services inflation in India, forecasting average CPI at 4.8% in FY26 and a risk of a 25 basis point repo rate hike to 6.75% in early FY27.
The RBI has held rates at 6.50% since February 2023, but a 'withdrawal of accommodation' stance tilts the next move toward tightening. Bond yields have already risen in both regions, and a hike would increase borrowing costs, potentially weighing on equities and interest-rate-sensitive sectors. The signals from Frankfurt and Mumbai underscore that the global fight against inflation is not yet over.
