Analysts predict 25 bps RBI rate increase amid soaring inflation

New Delhi, October 4 – With the RBI’s Monetary Policy Committee scheduled for early October, forecasts point toward a 25‑basis‑point rise in the policy repo rate. The shift would be a departure from the December‑first timeline many observers had previously cited.

Bank of America cites surging energy prices, heightened food inflation and overall price pressures as the main catalysts for an early move. The analyst team notes that after nearly two years of accommodative stance, the central bank is gearing up to re‑introduce policy support withdrawal.

SBI Research adds that the risk of a 25‑bp hike has grown considerably. They highlight expanding inflation, a deteriorating global backdrop, liquidity concerns and a renewed evaluation of international risk factors as justifications for pre‑emptive action.

Consumer price inflation accelerated to 4.82% in August from 4.45% in July. The monsoon season faces added uncertainty from a strong El Niño pattern and reduced rainfall, which could further strain food prices.

External pressures are also mounting. Brent crude breached the $100‑per‑barrel threshold and U.S. ten‑year Treasury yields are climbing toward 5%, narrowing the window for monetary easing. Nomura analysts estimate that the RBI will likely limit any increase this cycle to between 25 and 50 basis points, assigning an 80% probability to a modest hike rather than a more aggressive 75‑bp tightening.