RBI Monetary Policy Panel Set to Raise Rates by 25 Basis Points

The Reserve Bank's Monetary Policy Committee commenced its three-day meeting on Monday with consensus among economists and bankers pointing toward a 25 basis point rate hike. The decision would represent a notable reversal of the RBI's recent monetary stance, which included rate reductions in 2025 followed by an extended pause on policy adjustments.

The anticipated rate increase reflects growing concerns over inflation risks stemming from escalating geopolitical tensions in West Asia. The RBI's statement, to be released on October 7 at 10 am, will outline the central bank's assessment of economic conditions and its policy trajectory.

The current policy repo rate stands at 5.25 per cent. The last rate hike occurred in February 2023, when the RBI raised the benchmark rate by 25 basis points to 6.50 per cent. Following that increase, the central bank maintained steady rates throughout 2023-24 before initiating its rate-cut cycle in 2025.

A majority of participants in a recent survey of 16 economists and bankers anticipate the rate increase, citing inflationary pressures as a primary driver of the policy decision. The MPC's deliberations will determine whether the RBI follows through with the widely expected adjustment to its monetary policy stance.