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RBI rate hike expected on 7 October, first in nearly four years

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The Reserve Bank of India is poised to deliver its first RBI rate hike in nearly four years when Governor Sanjay Malhotra announces the Monetary Policy Committee’s decision in Mumbai at 10 am on Wednesday, 7 October 2026, according to a Bloomberg policy guide published by Moneycontrol on 6 October. The six-member committee began its meeting on 5 October.

Most economists expect a quarter-point move

Of 40 economists surveyed by Bloomberg, 34 expect the committee to raise the repo rate by 25 basis points to 5.50%, while the rest expect no change. The committee is expected to keep a neutral stance. A hike would be the first under Malhotra, who took office in December 2024 and oversaw a series of cuts last year.

Since the August meeting, inflation has picked up, oil has climbed back above $100 a barrel, the US Federal Reserve has begun tightening and the rupee has weakened. Foreign exchange reserves recorded a record weekly fall as the RBI stepped in to support the currency. With inflation nearing 5%, economists expect it to move towards the upper end of the 2%-6% tolerance band in the December quarter.

How far could the RBI rate hike cycle go?

Gaura Sen Gupta, chief economist at IDFC First Bank, expects a “shallow” path of increases totalling 75 basis points by February. Citigroup’s Samiran Chakraborty expects the RBI to raise its inflation projection by about 10 basis points from 5% and to upgrade its growth forecast from 6.7% for the year to March 2027. Oxford Economics’ Alexandra Hermann Prasad, however, argues that core inflation remains benign and gives the central bank room to wait.

Bond markets have already priced in tighter policy. The benchmark 10-year yield is near a two-and-a-half-year high of 7.23%, up almost 30 basis points since September.

A large pool of surplus cash

Policymakers are also dealing with excess liquidity, much of it from a June push to attract foreign-currency deposits that brought in about $133 billion. The RBI has already drained more than ₹1 trillion through bond sales and other steps. Traders will watch Malhotra’s comments for signs of how aggressively the central bank plans to absorb the rest, Bloomberg said.

Source: Moneycontrol / Bloomberg | Business Standard

Photo: Pinakpani / Wikimedia Commons, CC BY-SA 4.0 (resized)

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