RBI Poised to Raise Repo Rate to 5.50% Amid Inflation Concerns

The Reserve Bank of India’s Monetary Policy Committee (MPC) is set to meet on October 7, 2026, with expectations of a 25-basis-point increase in the repo rate, raising it from 5.25% to 5.50%. This would mark the first hike since February 2023, following four consecutive unchanged reviews in 2026. The decision comes amid rising domestic inflation and aggressive global policy tightening by central banks like the US Federal Reserve and the Bank of Japan.

Ajitabh Bharti, Executive Director and Co-founder of CapitalXB, highlights India’s stronger macroeconomic position compared to global peers, allowing the RBI more flexibility. He emphasizes the need to balance currency stability and internal liquidity without over-tightening. India’s inflation averaged 1.9% from April 2025 to February 2026 but rose to 4.82% in August, staying above the RBI’s 4% target for three months.

CapitalXB anticipates only a 25-basis-point hike, citing controlled inflation projections at 5.1% for FY27 and stable fiscal metrics. India’s fiscal deficit narrowed from 7.7% in FY25 to 7.4% in FY26, with the Union government meeting its FY26 target of 4.4%. Bharti suggests a shallow, data-dependent tightening cycle rather than rapid hikes, emphasizing calibration over panicked responses to global trends.

Beyond the rate decision, attention will focus on the MPC’s stance, revised inflation and growth projections, and future rate signals. For borrowers, a 25-basis-point hike would gradually increase lending costs for home, auto, and business loans. The key economic question is whether the RBI can curb inflation without stifling India’s resilient growth recovery.