RBI likely to hike rates ahead of October MPC meeting

New Delhi, October 4 – The Reserve Bank of India is expected to start raising its policy rates before the Monetary Policy Committee convenes next week. Economists note that the central bank may move forward with an initial 25‑basis‑point increase in October, accelerating the timeline that was previously projected for December.

Bank of America analysts point to rising energy costs, stubborn food inflation and broad‑based price pressures as key drivers for an early hike. They argue that after almost two years of accommodative policy, the RBI is ready to pull back support and that a modest 25‑bp move is the most probable outcome.

Research from SBI also highlights an increased risk of a 25‑bp rise, citing widening inflation, deteriorating global conditions, liquidity concerns and a renewed assessment of worldwide risks. The MPC, scheduled to meet from October 5 to 7, will decide on the benchmark repo rate.

Geopolitical tensions, volatile crude oil prices and higher global bond yields have tightened the space for policy easing. CPI inflation rose to 4.82% in August from 4.45% in July, while a strong El Niño and below‑average monsoon rains threaten agricultural output.

Other market observers note that Brent crude has breached the $100 per barrel mark and U.S. ten‑year Treasury yields are edging toward 5%, further weakening India’s macro outlook. Nomura analysts expect any rate increase this cycle to stay within a 25‑50 bp band, with an 80% probability of a limited hike rather than a sharper 75‑bp tightening.