RBI likely to raise repo rate to 5.5% as inflation and global tightening mount
The Reserve Bank of India's Monetary Policy Committee will meet Oct 5-7 and most economists expect a 25-basis-point hike to 5.5 % amid rising inflation and tighter global rates.
From Oct 5 to Oct 7 the Reserve Bank of India's six-member Monetary Policy Committee will review the repo rate, with a decision due on Oct 7. A majority of economists anticipate a 25‑basis‑point increase to 5.5 %, the first hike since Feb 2023. Retail inflation rose to 4.82 % in August, outpacing the RBI’s 4 % medium-term goal, while wholesale price inflation edged up to 9.92 %.
Higher crude oil prices and geopolitical tensions are widening price pressures. The move would align India with recent rate rises by the US Federal Reserve, the Bank of England and the Bank of Japan, which have all tightened amid global inflation concerns. The rupee has weakened about 6 % against the dollar this year, prompting worries about capital outflows. Governor Sanjay Malhotra said the RBI can use bond sales and FX swaps to curb surplus liquidity and keep overnight rates near the policy rate.
Why it matters
A rate hike would affect borrowing costs, inflation control and the rupee's stability for Indian consumers and investors.
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