Mumbai: PIMCO, the world's largest active bond manager, is neutral on Indian assets and expects the Reserve Bank of India to raise interest rates by a total of 75 basis points in the current tightening cycle — a shallower path than markets have priced in. The view comes from Stephen Chang, PIMCO's managing director and Asia portfolio manager, in an email interview with Reuters on October 14, 2026.
Chang said India has strong growth but inflation risks from food and energy prices have returned. The RBI raised its key repo rate to 5.50% in the prior week — its first increase in nearly four years — and shifted its stance to "calibrated tightening," signalling further hikes ahead.
Markets pricing more than PIMCO expects
Chang said he expects "further tightening by the RBI," with "the terminal adjustment closer to 75 basis points, versus the roughly 100 basis points currently priced by markets." He did not specify the time period over which the hikes would be delivered. India's overnight index swaps, a key gauge of rate expectations, imply a terminal repo rate of 6.25%–6.50%, or 100–125 basis points of increases over 12 months.
SBI Capital Markets has put the cycle at 75–100 basis points, broadly in line with PIMCO, while Nomura earlier held a lower 25–50 basis point view — showing just how wide the range of expectations remains.
Rupee line and Fed spillovers
Chang said the US Federal Reserve's tightening cycle influenced the RBI's decision, though domestic conditions were the main driver, with rupee stability and the US interest-rate outlook also playing a role. The rupee has been trading near 95 per dollar, and since October 10 the RBI has announced measures including redirecting oil companies' dollar purchases to a special facility and imposing cash margins on FX hedges. Chang said the measures aimed to curb speculative pressure and limit the impact of elevated oil prices — with Brent hovering near $105 a barrel — and signal the RBI is prepared to respond as USD/INR approaches 100.
PIMCO managed about $2.33 trillion globally at the end of June.
Sources:
- PIMCO Neutral on Indian Assets, Eyes 75 bps in Interest Rate Hikes, Exec Says — Reuters
- RBI May Raise Repo Rate by 75-100 bps in Current Cycle: Report — The Tribune
Chang said India has strong growth but inflation risks from food and energy prices have returned. The RBI raised its key repo rate to 5.50% in the prior week — its first increase in nearly four years — and shifted its stance to "calibrated tightening," signalling further hikes ahead.
Markets pricing more than PIMCO expects
Chang said he expects "further tightening by the RBI," with "the terminal adjustment closer to 75 basis points, versus the roughly 100 basis points currently priced by markets." He did not specify the time period over which the hikes would be delivered. India's overnight index swaps, a key gauge of rate expectations, imply a terminal repo rate of 6.25%–6.50%, or 100–125 basis points of increases over 12 months.
SBI Capital Markets has put the cycle at 75–100 basis points, broadly in line with PIMCO, while Nomura earlier held a lower 25–50 basis point view — showing just how wide the range of expectations remains.
Rupee line and Fed spillovers
Chang said the US Federal Reserve's tightening cycle influenced the RBI's decision, though domestic conditions were the main driver, with rupee stability and the US interest-rate outlook also playing a role. The rupee has been trading near 95 per dollar, and since October 10 the RBI has announced measures including redirecting oil companies' dollar purchases to a special facility and imposing cash margins on FX hedges. Chang said the measures aimed to curb speculative pressure and limit the impact of elevated oil prices — with Brent hovering near $105 a barrel — and signal the RBI is prepared to respond as USD/INR approaches 100.
PIMCO managed about $2.33 trillion globally at the end of June.
Sources:
- PIMCO Neutral on Indian Assets, Eyes 75 bps in Interest Rate Hikes, Exec Says — Reuters
- RBI May Raise Repo Rate by 75-100 bps in Current Cycle: Report — The Tribune
