Most economists see RBI raising rates in October policy

Most economists anticipate the Reserve Bank of India (RBI) will raise interest rates in October, according to a poll by The Economic Times. The majority of economists surveyed expect the repo rate to increase by 25 basis points, the first hike since February 2023. This follows rising inflation, heavy liquidity, and other central banks raising interest rates in the US and Japan.

While the Monetary Policy Committee (MPC) kept the repo rate at 5.25% in its most recent meeting, economists anticipate a rate increase of 50-75 bps this financial year. Several economists believe inflation will be higher than RBI's estimate during the second quarter. They advise building moats through a 25 bps hike in October and December and then pausing to assess the situation with upcoming data.

The upcoming policy is expected to be more hawkish, with a high probability of a rate hike or change in stance. Some economists suggest the rate hike could occur as early as October if crude oil prices remain high, while others believe the MPC may keep rates unchanged and closely monitor government bond yields and price pressures.