RBI MPC Meet Begins Today: Will the Rate-Cut Cycle End With First Repo Rate Rise Since 2023? Check Expected Hike

The Reserve Bank of India (RBI) is widely expected to raise the policy repo rate by 25 basis points in its October monetary policy review, potentially resulting in a reversal of the rate-cut cycle that started in 2025. The Monetary Policy Committee (MPC) is meeting from October 5 to 7, with the policy decision due on October 7.

The repo rate presently stands at 5.25 per cent. If the RBI raises it by 25 basis points, the rate would move to 5.50 per cent. This would be the first repo rate hike since February 2023, when the central bank increased the rate to 6.50 per cent.

Why Is the RBI Considering a Rate Hike?

A major concern is the renewed escalation in West Asia and its impact on global crude oil prices. India imports a large share of its crude oil requirements, making higher energy prices a potential source of inflationary pressure.

The RBI's August policy had assumed an oil price of around $90 per barrel for 2026-27. However, crude prices have since moved above that level, with economists warning that a sustained increase could push up transportation, fuel and production costs.

Higher crude prices can also create second-round inflationary effects as businesses pass increased input and transportation costs on to consumers.

Inflation Risks Are Rising

Retail inflation has also been bolstered. India's consumer price inflation rose to 4.82 per cent in August, compared with 4.45 per cent in July, remaining above the RBI's 4 per cent medium-term target for a third consecutive month.

Economists observed that food inflation has gained momentum, while core inflation and services inflation have also shown signs of strengthening. Higher input costs have already prompted some automobile manufacturers to announce price increases, while other consumer-goods companies could face similar pressures.

RBI on Economic Growth

The rate decision comes despite strong economic activity. The RBI had projected real GDP growth for 2026-27 at 6.7 per cent, but several economists expect the central bank to revise its growth forecast upwards because of stronger-than-expected activity. Some estimates put the revised forecast above 7 per cent.

Strong growth gives the RBI more room to prioritise inflation control without adding monetary support.

Could More Rate Hikes Follow?

Market expectations suggest the October move could be followed by another 25-basis-point increase in December if crude prices remain elevated. However, economists differ on how long or aggressive the tightening cycle could become.

The RBI's position and its updated inflation and growth forecasts will therefore be closely watched. A sustained rise in oil prices, broader inflation pressures and global monetary tightening could determine whether October's expected hike becomes the beginning of a larger rate cycle or remains a limited adjustment.