RBI MPC begins 3-day meeting today amid expectations of first rate hike since 2023

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) began its 3-day meeting on Monday amid growing expectations of the first interest rate hike since 2023.

The RBI maintained the repo rate at 5.25% for four consecutive policy meetings and cut rates by a cumulative 125 basis points in 2025. However, the bank is expected to shift towards monetary tightening amid rising inflationary risks and elevated crude oil prices.

The commodity markets saw Brent crude trading at around USD 101.26 per barrel while crude oil was trading at around USD 89.98 per barrel, according to an ANI report.


Read more: RBI MPC must raise rates as inflation and external risks rise

The central bank’s policy decision is due on Wednesday, with the market largely expecting the apex bank to increase interest rates by 25 bps.

Union Bank of India anticipates the RBI to raise the repo rate by 25 basis points in October, with further hikes to be delivered in FY27, which would potentially reach nearly 5.75-6 per cent.

"We expect a 25bps rate hike, followed by one or two additional hikes during the remainder of FY27, taking the repo rate to 5.75-6.00%, accompanied by hawkish guidance signalling continued vigilance on inflation," the report said, citing the bank.

Read more: RBI likely to hike repo rate by 25 bps to 5.50% in October policy: ET Poll

EY said in the report, the central bank would recognise four key factors at its October 2026 Monetary Policy Committee (MPC) meeting:

• The US Federal Reserve's recent 25-basis-point rate hike
• India’s positive growth outlook
• WPI and CPI facing persistent inflationary pressures and sustained above-trend growth in broad money supply (M3).

"Chances for a change in the RBI's policy stance and a 25-basis-point hike in the repo rate are high," EY said.

The RBI’s Monetary Policy Committee (MPC), at its August policy meeting, maintained the benchmark repo rate unchanged at 5.25 per cent and retained its 'neutral' stance. The apex bank opted to wait for greater clarity on the inflation outlook amid uncertainties over the southwest monsoon, geopolitical tensions and global trade policies.

The Standing Deposit Facility (SDF) rate was kept unchanged by the RBI at 5%, while maintaining the Marginal Marginal Standing Facility (MSF) rate and the bank rate at 5.5 per cent.

RBI Governor Sanjay Malhotra said the headline inflation was anticipated to rise from supply-side pressures from food and fuel, while core inflation remained moderate and was projected to ease after peaking in the third quarter. He also noted that before taking further policy action, the MPC needed better understanding on the trajectory and composition of inflation.

According to an SBI Research report, consumer price inflation is expected to rise beyond 6.5% in the coming months, building the case for the RBI to build a policy buffer against rising inflationary risks.

"Going forward, we believe CPI inflation may cross the 6.5% mark before dropping to less than 6% in early 2027. Time to build moats through a 25-bps hike in October and Dec MPC each, and then to pause and take stock with upcoming data," the report said.

(With inputs from ANI)