05 October,2026 12:54 PM IST | Mumbai | mid-day online correspondent
RBI. File pic.
The Reserve Bank of India (RBI) began its three-day Monetary Policy Committee (MPC) meeting on Monday amid growing expectations of an interest rate hike amid rising inflation, elevated crude oil prices and a softer rupee, reported news agency IANS.
The RBI has kept the repo rate unchanged for four consecutive policy meetings at 5.25 per cent, since December 2025.
The six-member Monetary Policy Committee will review the key macroeconomic developments before announcing a decision on the policy rate.
The policy decision is due on October 7, and analysts expect the apex bank to increase its key lending rate or the repo rate for the first time since February 2023. The RBI had raised the repo rate by 0.25 per cent to 6.50 per cent in February 2023 and had then kept the rate unchanged through 2023-24 before beginning its rate-cut cycle in 2025.
Bankers and economists said the RBI is likely to increase its rates due to the mounting inflationary pressure amid the re-escalation of the West Asia conflict, reported PTI.
India's headline retail inflation was at an eight-month high at 4.82 per cent in August from 4.45 per cent in July.
While the inflation is within RBI's tolerance band of 2 to 6 per cent, the Consumer Price Index (CPI) inflation has stayed above the RBI's 4 per cent target for three consecutive months, rising from 3.93 per cent in May to 4.38 per cent in June and 4.45 per cent in July.
In its August monetary policy, the central bank projected CPI inflation for FY27 at 5 per cent with Q2 at 4.7 per cent, Q3 at 5.9 per cent, and Q4 at 5.5 per cent. Core inflation was projected at 4.3 per cent for 2026-27.
While adopting a neutral stance in its August monetary policy, the central bank had opted to wait for greater clarity on the inflation outlook amid uncertainties over the southwest monsoon, El Nino, geopolitical tensions and global trade policies.
"After almost two years of monetary accommodation, the RBI appears set to take early steps to start withdrawing the policy support in October MPC. As such, we now believe that the RBI will go ahead with a rate hike of 25 bp in October MPC," said Bank of America.
A recent SBI Research report too expects a 25 basis point hike in repo rate and had said, "We believe the balance of risks has tilted decisively towards a 25-bps rate hike at this juncture."
(With inputs from IANS and PTI)
