The RBI has kept policy interest rates unchanged so far this year, after raising it cumulatively by 125 basis points (1.25 percentage point) in 2025.
The Reserve Bank of India (RBI) is expected to raise policy interest rates next week for the first time in over three-and-half years, with inflation staying above its medium-term target of 4% for a third straight month in August and heightened geopolitical tensions adding to pressure on the rupee.
According to analysts, the central bank is likely to hike policy repo rate by 25 basis points to 5.5% in its October bi-monthly policy review and another hike expected in December. If the RBI hikes the repo rate next week, it would be the first increase since February 2023, when the rate was raised by 25 bps to 6.5%.
The RBI has kept policy interest rates unchanged so far this year, after raising it cumulatively by 125 basis points (1.25 percentage point) in 2025.
The central bank’s rate setting panel, Monetary Policy Committee (MPC), is scheduled to meet from October 5-7 in Mumbai. RBI Governor Sanjay Malhotra is slated to announce the MPC decisions on October 7.
“We believe the balance of risks has tilted decisively towards a 25-bps rate hike at this juncture,” SBI Research said in a note.
“A combination of broadening inflationary pressures, worsening global macros, evolving liquidity conditions and a renewed global repricing of risks is making the case for pre-emptive action stronger,” it said.
The Consumer Price Index -based (CPI) retail inflation rose to 4.82% in August, from 4.45% in the previous month. The headline inflation likely remained above the RBI’s mid-term target of 4% in September too. The September inflation data will be released in the middle of this month.
According to SBI Research, inflation is becoming increasingly broad-based. “Our analysis shows a clear generalisation of price pressures with a possibility of pass through in future,” it added.
Repo rate, the short for repurchase rate, is the interest at which the central bank lends short-term funds to commercial banks. Interests paid by banks on fixed deposits and charged on lending like home and auto loans follow repo trends.
Source : https://www.deccanherald.com/business/rbi-may-hike-repo-rate-to-55-by-25-bps-amid-inflation-4168571
