Stories
India RBI Faces Pressure to Hike Rates Amid Broadening Inflation, Robust Growth, Global Trends
- •India's central bank is under increasing pressure to raise borrowing costs at its October policy meeting due to broadening inflation, resilient economic growth, and a wave of global rate hikes.
- •Inflationary pressures are becoming more widespread, with prices for nearly half of India's inflation basket rising by 4% or more year-on-year, up from about a third in March.
- •Economists widely expect the Reserve Bank of India (RBI) to raise its repo rate by 25 basis points to 5.50% at the end of its October 5-7 meeting.
- •Robust economic growth, with India's economy expanding nearly 8% in the April-June quarter, provides the RBI with room to prioritize its inflation mandate.
- •Global central banks, including those in the US, Japan, and Europe, have already raised borrowing costs, making it difficult for the RBI to remain on the sidelines.
Key Questions Answered
Economists expect the Reserve Bank of India to consider a 25-basis-point rate hike at its October meeting due to broadening inflation, resilient economic growth, elevated crude prices, and a growing wave of global rate hikes. Data indicates that price pressures are seeping into the broader economy, with prices for nearly half of India's inflation basket rising by 4% or more year-on-year.
About 60%, or 35 out of 61 economists polled by Reuters, expect the Reserve Bank of India to raise its benchmark repo rate by 25 basis points to 5.50% at the conclusion of its October 5-7 meeting.
Overseas investors have withdrawn nearly $26 billion from local stocks so far in 2026. Indian equities have lagged behind their peers as investors grew concerned over a lack of artificial intelligence opportunities and a weakening rupee.
