Inflation: Pressure on RBI to hike interest rates; Rupee also weakens; Will the repo rate rise in October?

New Delhi. Amid fears of a sharp rise in inflation and a shift in the stance of major global central banks, pressure is mounting on the Reserve Bank of India (RBI) to raise interest rates. A decision to hike rates could be taken during the meeting of the RBI’s six-member Monetary Policy Committee (MPC) scheduled for October 5–7.

According to a survey of economists, the RBI might raise the repo rate by 25 basis points, bringing it to 5.50 percent. If this happens, it will be the first time since February 2023 that the repo rate crosses the 5.25 percent mark. Out of the 53 economists surveyed, 29 have projected another hike of 25 basis points by December. In August, the country’s retail inflation rose to 4.82 percent, remaining above the RBI’s 4 percent target for the third consecutive month. Wholesale inflation also climbed to 9.92 percent in August. Given the 25-basis-point rate hikes by the US Federal Reserve and the Bank of Japan, the possibility of the RBI following suit cannot be ruled out.

Challenges regarding the Rupee and foreign investment: The rupee has weakened by nearly 6 percent against the dollar this year. Meanwhile, foreign investors continue to sell off assets due to rising US interest rates and the narrowing interest rate differential between India and the US.

Inflation could cross 6.5%
According to SBI Research, retail inflation could rise to around 5.65 percent in September and exceed 6.5 percent during October–November. However, it is projected to fall back below 6 percent by early 2027. The brokerage has predicted a likely 25-basis-point hike in the repo rate during the October meeting. The challenge regarding the rupee and foreign investment: The rupee has weakened by approximately 6% against the dollar this year. Meanwhile, foreign investors continue to sell off holdings due to rising US interest rates and a narrowing gap between Indian and US interest rates.

What happened in the last five meetings?
The RBI reduced the repo rate from 5.50% to 5.25% in December 2025. No changes were made during the meetings held in February, April, June, and August of 2026.

Meeting                         Decision                               Repo Rate
August 2026               No change                              5.25%
June 2026                  No change                              5.25%
April 2026                 No change                              5.25%
February 2026           No change                              5.25%
December 2025        25-point cut                            5.25%