Will RBI hike repo rate on October 7?
What's the story
The Reserve Bank of India's (RBI) six-member Monetary Policy Committee (MPC) will meet from October 5 to 7. The meeting will review economic conditions and determine the next course of monetary policy. The MPC's decision is due on October 7, with investors closely monitoring the possibility of a repo rate hike, the first since February 2023.
Rate considerations
RBI has kept repo rate unchanged
The RBI has maintained the repo rate at 5.25% for four consecutive policy meetings, after a cumulative cut of 125 basis points in 2025.
However, rising inflation, higher energy prices, and rate hikes by major global central banks have increased expectations that the RBI may adopt a tighter monetary policy stance in October.
Economists expect a possible 25 basis point increase in the repo rate to 5.50%.
Rate hike rationale
Brickwork Ratings sees realistic possibility of a hike
Rajeev Sharan, Head of Research at Brickwork Ratings, said a 25 basis point hike to 5.50% has become a realistic possibility.
He cited rising retail inflation, crude oil prices above $100 per barrel, and a weakened rupee as factors adding pressure on the currency.
However, he also noted that inflation remains within the RBI's target range and price pressures have not yet become broad-based.
Policy balance
What did Sugandha Sachdeva say?
Sugandha Sachdeva, Founder of SS WealthStreet, emphasized that RBI's monetary policy aims to ensure price stability while also considering growth. She said a 25-basis-point hike in the repo rate is likely at upcoming MPC meeting due to strengthened inflationary pressures and resilient domestic economic growth.
Inflation pressure
Consumer price inflation rose to 4.82% in August
Consumer price inflation rose to 4.82% in August from July's 4.45%, moving further above the RBI's medium-term target of 4%.
Seema Srivastava, Senior Research Analyst at SMC Global Securities, said this rebound puts renewed pressure on the RBI's medium-term target.
She warned that persistent volatility in perishables and staple food items could unanchor household inflation expectations, strengthening the case for a preemptive rate hike.