RBI likely to raise repo rate by 25 bps
Rate hike would mark a reversal after four cuts in 2025 as inflationary pressures rise
The Reserve Bank of India is likely to raise its key policy rate by 25 basis points on Wednesday, with several economists expecting the first rate hike in nearly three-and-a-half years as inflationary pressures rise amid the continuing West Asia conflict.
RBI Governor Sanjay Malhotra will announce the monetary policy decision at 10 am after the conclusion of the three-day meeting of the Monetary Policy Committee.
A 25-basis-point increase in the repo rate would mark a reversal in the central bank's policy stance after four rate cuts totalling 125 basis points in 2025, followed by a prolonged pause.
The last repo rate hike came in February 2023, when the RBI raised it by 25 basis points to 6.50 per cent. The central bank kept the rate unchanged through 2023-24 before beginning its rate-cut cycle in 2025.
The policy repo rate currently stands at 5.25 per cent.
A majority of participants in a PTI poll expect a 25-basis-point hike and a hawkish tone from the RBI at Wednesday's review. However, views are divided on whether the central bank will change its policy stance.
While most experts said a rate increase was imminent, some felt the RBI could hold off on a hike at this meeting.
The government has mandated the RBI to keep consumer price index-based retail inflation at 4 per cent, with a tolerance band of 2 per cent on either side.
Retail inflation rose to 4.82 per cent in August from 4.45 per cent in July.