RBI MPC October 2026: Sanjay Malhotra & co may raise interest rates to 5.50% as inflation broadens, poll finds

BENGALURU: The Reserve Bank of India is expected to raise interest rates by 25 basis points to 5.50% in October, the first increase since 2023, with one more hike likely in December, a majority of economists polled by Reuters said, as inflation picks up.

Most major central banks have started raising rates or are considering doing so as energy prices spike because of war in the Middle East, with the US Federal Reserve set to hike at least one more time following a rate rise earlier this month.

After several years of managing the rupee's, gradual slide against the dollar, which has weakened about 6% this year, the RBI is coming under increasing pressure to back up its defence of the currency with a rate increase.


Also read: Broadening inflation, robust growth, global hikes build case for India RBI tightening

"RBI has to be in a realisation that we are possibly slightly behind the curve and because the Fed has increased, we need to increase rates," said Indranil Pan, chief economist at Yes Bank.

Inflation accelerated to 4.82% in August, exceeding the RBI's 4% medium-term target for the third consecutive month. The increase in consumer prices was driven largely by sharply higher energy and food costs.

Nearly 60% of economists, 35 of 61, in the September 18 to 28 Reuters poll expected the Monetary Policy Committee to raise its repo rate by 25 basis points to 5.50% at the end of its October 5 to 7 meeting. That would mark the first increase since February 2023.

Minutes from the August RBI policy meeting showed several policymakers, including Governor Sanjay Malhotra, favoured a rate increase if inflationary pressures broadened.

"We expect the RBI to start the hiking process in October. Inflation is tracking higher than the RBI's forecast (by) about 20 basis points for the current quarter, and the rise is fairly broad-based," said Abhishek Upadhyay, co-head of economics and fixed income research at ICICI Securities Primary Dealership.

A slim majority of economists, 29 of 53, expected the RBI to raise rates by at least another 25 basis points by December. That was a reversal from last month's survey, when median projections showed the RBI would stand pat on rates until March next year.

Poll medians also showed rates remaining at 5.75% until at least mid-2028, suggesting this could be one of the shallowest RBI rate-hiking cycles in at least a decade.