Stories
RBI MPC Meets: Rate Hike Looms as Crude Surges, Inflation Pressures Mount
- •The Reserve Bank of India's Monetary Policy Committee (MPC) begins a three-day meeting, facing a difficult decision on interest rates amidst rising crude oil prices and persistent inflation.
- •The RBI has maintained the repo rate at 5.25% for four consecutive meetings, but market expectations now lean towards a 25-basis-point hike.
- •Surging oil prices, with Brent crude around $101.26 a barrel, are complicating the RBI's inflation outlook, potentially increasing fuel, transportation, manufacturing, and logistics costs.
- •Union Bank of India anticipates a 25-basis-point repo rate hike this month, with further increases possible in FY27, pushing the rate to 5.75%-6%.
- •Key factors influencing the October policy decision include the US Federal Reserve's recent rate hike, India's growth outlook, persistent CPI and WPI inflation, and sustained growth in money supply (M3).
Key Questions Answered
The RBI has held the repo rate steady at 5.25 per cent for four consecutive meetings. The central bank previously delivered cumulative rate cuts totaling 125 basis points throughout 2025 before hitting pause.
Brent crude has surged past $100 per barrel, reaching around $101.26 while other crude traded near $89.98. These higher oil prices feed directly into fuel costs and indirectly inflate transportation, manufacturing, and logistics expenses, creating fresh pressure on headline inflation.
EY highlights four major factors shaping the October policy decision: the US Federal Reserve's recent 25-basis-point rate hike, India's comfortable growth outlook, persistent CPI and WPI inflationary pressures, and sustained above-trend growth in broad money supply.
