Politics · India Bureau
RBI poised to raise rates by 0.25% in October amid inflation surge
The Reserve Bank of India is expected to raise its policy repo rate by 25 basis points at its October monetary policy review as inflationary pressures mount, marking a potential reversal of the rate-cut cycle that began in 2025.
LSN India ·
India's central bank is likely to shift course on interest rates next month as inflation concerns intensify, according to a survey of economists and bankers. The RBI is widely expected to hike the repo rate by 0.25 per cent to 5.50 per cent, ending a period of monetary easing and reversing the cuts implemented since the start of this year.
The anticipated rate increase comes as inflationary pressures build from multiple quarters, including renewed tensions in West Asia and aggressive rate increases by global central banks. These factors have created what policymakers view as a justifiable environment for tightening monetary conditions domestically. The RBI has kept its policy rate unchanged at 5.25 per cent since completing its rate-cut cycle earlier this year, having previously maintained rates at 6.50 per cent throughout 2023-24.
"Coordination with global central bank hikes, rising inflation risks and strong growth momentum provide policy space to hike," said Kanika Pasricha, chief economic advisor at Union Bank of India. Such a move would represent the first rate increase since February 2023, when the central bank last raised the repo rate by the same quantum.
The survey of 16 economists and bankers reflects growing consensus that domestic inflation risks now warrant preventive action. This potential policy pivot underscores the RBI's balancing act between supporting growth and controlling price pressures in a complex global environment.