Economists increasingly expect the RBI to consider a 25-basis-point repo rate hike in October as inflation, crude prices and tighter global financial conditions add pressure.
Highlights
- Most India-focused economists cited by ET expect the RBI to raise the repo rate by 25 basis points.
- RBI’s repo rate currently stands at 5.25%, unchanged since December 2025.
- India’s retail inflation climbed to a 20-month high of 4.82% in August.
- Deutsche Bank, DBS, Nomura and SBI economists have moved toward expectations of tighter RBI policy.
Mumbai: Expectations of an interest-rate increase by the Reserve Bank of India are building after the US Federal Reserve raised rates and signalled tighter monetary conditions, adding another factor to the RBI’s upcoming policy decision.
Most India-focused economists cited by the Economic Times now expect the RBI to raise its policy repo rate by 25 basis points. The central bank last changed the repo rate in December 2025, when it cut it by 25 basis points to 5.25%.
The shift in expectations comes amid renewed inflation concerns. India’s retail inflation reached 4.82% in August, a 20-month high. Food inflation accelerated to 6%, while core inflation increased to 4.2%, according to the ET report.
Economists at Deutsche Bank, DBS, Nomura and State Bank of India are among those expecting higher rates. Nomura has changed its earlier call for the RBI to hold rates and now expects a 25-basis-point increase in both October and December, taking the repo rate to 5.75%. It nevertheless described the October decision as a close call rather than a certainty.
SBI Research has also advocated 25-basis-point increases in October and December, citing elevated crude-oil prices, external shocks and signs of broader inflationary pressure. The RBI’s next Monetary Policy Committee meeting is scheduled for October 5-7.
Global developments are adding another dimension. The Federal Reserve has raised rates by 25 basis points, while several other major central banks have also tightened policy. A narrower interest-rate differential between India and major overseas markets can affect capital flows and put additional pressure on the rupee and domestic bond yields.
At the same time, the RBI is absorbing surplus banking-system liquidity. Reuters reported that the central bank sold ₹500 billion of bonds and plans additional sales, a move intended to make monetary-policy transmission more effective.
The October decision will therefore depend on how the RBI assesses domestic inflation and growth alongside crude-oil prices, liquidity, the rupee and tightening global financial conditions.
