RBI MPC Begins Three-Day Meet, 25 Bps Rate Hike Likely As Inflation Risks Rise
Mumbai: The Reserve Bank of India’s Monetary Policy Committee (MPC) began its three-day meeting on Monday, with expectations building that the central bank could raise the repo rate by 25 basis points amid rising inflation risks and the West Asia conflict. The RBI will announce the monetary policy decision on October 7 at 10 am. A PTI poll of 16 economists and bankers showed that a majority…
The Reserve Bank of India's Monetary Policy Committee (MPC) commenced a three-day meeting on Monday, with anticipation mounting that the central bank might increase the repo rate by 25 basis points, owing to surging inflation risks and the ongoing conflict in West Asia. The RBI is slated to reveal its monetary policy decision on October 7 at 10 am. A recent poll by PTI of 16 economists and bankers suggests a majority anticipate a 25-basis-point hike, coupled with a more assertive policy stance.
A rate hike would signal a shift in the RBI's policy trajectory after successive rate cuts in 2025 and a prolonged pause in adjustments. The current repo rate stands at 5.25 percent. The last increase in the repo rate occurred in February 2023, when the RBI hiked it by 25 basis points to 6.50 percent. Goldman Sachs predicts the RBI to raise rates by 25 basis points in both October and December. It also posits a potential shift in the policy stance from "neutral" to "calibrated tightening" or "withdrawal of accommodation".
Inflation concerns have intensified, with India's retail inflation surging to an eight-month high of 4.82 percent in August, up from 4.45 percent in July. Dipti Deshpande, principal economist at Crisil, attributes the rise in inflationary pressures to the escalation of the West Asia conflict and its repercussions on energy and commodity prices.
The government has directed the RBI to maintain CPI inflation at 4 percent, within a tolerance band of 2-6 percent. However, views on an immediate rate hike vary. Some economists, like Bank of Baroda Chief Economist Madan Sabnavis, suggest the RBI should hold the repo rate, arguing that a wait until December would yield greater clarity on the kharif crop and inflation.
Shrikant Goyal, Managing Director at Getfive Funds, also expects the MPC to maintain the repo rate and adhere to a neutral stance. Vineet Nahata of Power Gilt Treasuries, while acknowledging the possibility of a 50-basis-point increase due to surging global bond yields, leans towards a 25-basis-point hike as the more probable outcome.
Written by urgent.news from Free Press Journal's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
