Stories
RBI Poised to Hike Repo Rate by 25 bps Amid Rising Inflation and Currency Pressures
M
Moneycontrol•06-10-2026, 06:24
RBI Poised to Hike Repo Rate by 25 bps Amid Rising Inflation and Currency Pressures
- •The Reserve Bank of India is expected to raise the repo rate by 25 bps at its October 2026 MPC meeting while maintaining a neutral policy stance.
- •Indian CPI inflation rose to a 22-month high of 4.82 percent in August 2026, driven by supply-side issues, climate risks, and elevated Brent crude prices above USD 100 a barrel.
- •Economic fundamentals remain robust with Q1FY2027 GDP recording strong growth of 7.8 percent YoY, exceeding the RBI forecast.
- •Global factors such as a depreciating rupee, rising international bond yields, and tighter monetary policies by major central banks are prompting the shift in RBI strategy.
- •RBI Governor Sanjay Malhotra emphasized that the central bank cannot afford complacency against building economic and financial vulnerabilities.
Key Questions Answered
During CY2025, the Reserve Bank of India delivered a cumulative 125 bps reduction in the repo rate, lowering it from 6.50 percent to 5.25 percent. Additionally, the central bank reduced the Cash Reserve Ratio by 100 bps from 4 percent to 3 percent.
The expected 25 bps rate hike is driven by steady inflation increases, elevated Brent crude prices above US$ 100 a barrel, a depreciating rupee trading around 96.33 per USD, rising global bond yields, and a shift toward tighter monetary policies by several major global central banks.
India's Q1FY2027 GDP recorded a year-over-year growth of 7.8 percent, which successfully exceeded the Reserve Bank of India's forecast of 7.0 percent.
