RBI Seen Hiking Repo Rate as Inflation Rises Amid Global Interest Rate Hike

The Reserve Bank of India (RBI) is expected to raise its repo rate by 25 basis points in October's policy meeting, according to economists. The decision comes as inflation rises and global crude oil prices spike.

Rising inflation and elevated food prices have pushed CPI inflation above the RBI's upper tolerance threshold of 6%, with some economists predicting it could reach 7% in 3QFY27.

The global economy is also shifting towards higher interest rates, with major central banks raising their rates in September. The US Federal Reserve, European Central Bank, and Bank of Japan have all increased their rates, while the Bank of England has kept its rate unchanged but maintained a cautious stance.

However, not all economists agree on the need for an extended tightening cycle. Apoorva Javadekar, chief economist at Shriram Finance, believes that growth momentum is moderating and rainfall deficits are more damaging to rural incomes than inflation.