RBI May Hike Repo Rate in October Amid Rising Inflation and Oil Prices

Economists are now predicting that the Reserve Bank of India (RBI) will raise its repo rate by 25 basis points in October, as inflation and global bond yields put pressure on the central bank to tighten monetary policy.

The RBI's Monetary Policy Committee is scheduled to meet from 5-7 October to decide on the benchmark policy rate. Bank of America has revised its forecast, expecting a 25 bps repo rate increase at the October meeting, compared with its earlier call for a December hike.

Rising energy prices, food inflation, and broader inflationary pressures could prompt the RBI to begin withdrawing monetary support after nearly two years of easing. The State Bank of India has also favoured an early policy response, citing geopolitical tensions, risks from higher crude oil prices, and a reassessment of global risks.

Domestic inflation has added to the pressure, with Consumer Price Index (CPI) inflation rising to 4.82 per cent in August from 4.45 per cent in July. Food inflation could face further risks if a strong El Niño and below-normal rainfall in October affect rabi crop yields.