RBI likely to raise rates 25 bps in October and December as inflation risks persist

With inflationary pressures mounting across the economy, the RBI is poised to resume its rate hiking cycle following recent pauses in monetary tightening. The central bank faces mounting evidence that price growth could exceed its upper tolerance level of 6 percent, prompting policymakers to act preemptively to anchor inflation expectations.

Market analysts and economists tracking RBI decisions expect sequential 25 basis point rate increases at the October and December policy reviews. These moves would extend the current tightening phase that began earlier this year as the RBI sought to combat persistent inflationary pressures affecting consumers and businesses across India.

Despite the expected rate increases, analysts characterize the broader rate-hiking cycle as shallow relative to historical precedent. Most economists project the total cumulative increase in this cycle will remain contained at 50-75 basis points, suggesting the RBI may pause further tightening once inflation shows signs of moderating toward its medium-term target.

The trajectory of inflation data in coming weeks will prove critical in determining the RBI's policy stance. Any material increase in consumer or wholesale price indices could reinforce the case for continued rate action, while evidence of cooling price pressures might prompt the central bank to hold rates steady earlier than currently anticipated.