RBI Rate Hike Expected in October as CPI Rises to 4.82%

Economists widely expect the Reserve Bank of India to raise the repo rate by 25 basis points at its Monetary Policy Committee meeting in early October, with a decision expected around October 7, 2026. A second 25 bps hike in December is also being pencilled in, which would make this a shallow rate hike cycle.

The expected turn follows a rise in retail inflation to 4.82% in August from 4.45% in July, with food inflation climbing to 5.95% from 5.52%. Higher crude oil prices linked to the West Asia conflict and a 12% rainfall deficit in the monsoon as of late September are adding to price pressures.

Will the RBI Raise the Repo Rate in October 2026?

Most economists quoted in media reports say yes. D.K. Joshi, chief economist at Crisil, said monetary policy is on the verge of turning and that the agency anticipates one hike in October and possibly another in December. Economists at Nomura and HSBC are also said to expect a two-hike scenario.

Why Are Inflation Pressures Building?

Two drivers stand out. First, crude oil, with Brent trading around $103 a barrel on September 30, raises input and transport costs across the economy. Second, the weak monsoon threatens kharif output and could push up food prices in coming months. CPI inflation has already moved up by 37 basis points between July and August.

What Does It Mean for Borrowers and Banks?

A repo rate increase is typically passed on quickly to loans linked to external benchmarks, raising EMIs for home, auto and MSME borrowers. Deposit rates may also rise over time. The 10-year government bond yield was around 7.15% at the end of September, reflecting expectations of tighter policy, and benchmark bonds fell for a third straight month.

Market and Growth Reaction

Indian equities had their worst month since March in September, and the rupee traded near ₹95.97 to the dollar. Economists expect GDP growth of about 7% in FY27, slower than the 7.7% recorded in FY26, partly because of the challenging monsoon. Central banks in the US, Europe, Australia and Japan have also tightened recently, limiting room for India to stay accommodative without pressuring the currency.

What Happens Next?

The MPC outcome, the RBI’s inflation and growth projections and its commentary on the rupee and liquidity will be the key watch points. The September CPI print, due in mid-October, and the trajectory of crude oil will shape whether a December hike follows.

Frequently Asked Questions

When is the next RBI MPC decision?

The Monetary Policy Committee meets in early October 2026, with the decision expected around October 7.

How much could the repo rate rise?

Economists expect a 25 basis point increase in October and possibly another 25 bps in December, described as a shallow hiking cycle.

Why is the RBI expected to raise rates?

Inflation rose to 4.82% in August, crude oil is near $103 a barrel and a weak monsoon threatens food prices, pushing economists to expect policy tightening.