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RBI rate hike in October? Economists see 25 bps rise as oil and inflation climb

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The odds of an RBI rate hike in October 2026 are rising. Several economists now expect the Monetary Policy Committee to raise the repo rate by 25 basis points at its October 5–7 review, citing firmer inflation, a sustained rally in crude oil and tightening by major central banks.

RBI rate hike in October? Economists see 25 bps rise as oil and inflation climb
Market chart on a screen. Representative image (Pexels, royalty-free).

What is driving the shift

The RBI held the repo rate at 5.25% in August but flagged the risk of supply-side inflation spreading. That risk appears to be materialising. Retail inflation rose to 4.82% in August from 4.45% in July, food inflation reached 5.66% and core inflation climbed to 4.44%. An SBI Research study found that the number of items accounting for 90% of CPI’s weighted contribution jumped from 22 in January to 51 in August, a sign that price pressure is broadening.

Oil and global rates

Brent has risen well above the RBI’s own crude assumptions of $90–95 a barrel, and India’s 10-year bond yield is above 7%. Reports also note rate increases by the US Federal Reserve, the European Central Bank and the Bank of Japan in September.

How big could the cycle be?

Views differ. Motilal Oswal’s Radhika Piplani said the RBI may not wait for inflation to show up fully in third-quarter data and sees scope for 75–100 bps of hikes if the oil shock persists. Shriram Finance’s Apoorva Javadekar argued the case for a long tightening cycle is weak because growth is moderating and the oil shock itself hurts demand. Many economists expect a shallow cycle of 50–75 bps across the October and December meetings.

Why it matters: A hike would raise borrowing costs for home and auto loans and weigh on equities that are already reacting to US–Iran tensions and crude prices. The outcome depends heavily on the Gulf oil situation. The government has also tried to ease food prices through measures such as the edible oil import duty cut.

Sources: Deccan Chronicle | Zee News | Moneycontrol

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