The expectations from the Reserve Bank of India (RBI) to raise the repo rate by 25 basis points have gained momentum amid rising crude oil prices, a weakening rupee and tighter global financial conditions, according to an EY report. The report pointed to recent movements in the Wholesale Price Index (WPI) and Consumer Price Index (CPI), saying inflationary pressures remain persistent. According to EY, the current price pressures are largely linked to cost-side and supply-related factors.
EY said, “chances for a change in the RBI’s policy stance and a 25-basis-point hike in the repo rate are high.”
Several factors have added to the pressure on India’s inflation outlook. EY stresses higher international crude oil prices and the impact of an El Niño-related deficient monsoon on food prices.
A weaker rupee can also add to imported inflation by making commodities and other goods purchased from overseas more expensive in domestic currency terms. Against this backdrop, the recent movement in WPI and CPI has emerged as an important factor for monetary policy considerations.
The report also pointed to money supply growth as another factor that the RBI could monitor. Average M3 growth stood at 15.0 per cent between June and August 2026, according to EY.
M3 is a broad measure of money circulating in an economy and includes currency as well as bank deposits. Faster growth in the money supply can be an important monetary policy indicator when assessed alongside inflation and broader economic conditions.
Four Factors RBI Could Assess At October MPC Meet
According to EY, the RBI is likely to weigh four major developments at its October 2026 Monetary Policy Committee (MPC) meeting.
These include the US Federal Reserve’s recent 25 basis point rate increase, India’s continued growth momentum, persistent increases in WPI and CPI, and M3 growth remaining above its trend level.
India’s real gross domestic product (GDP) expanded 7.8 per cent in the first quarter of FY27, highlighting the strength of economic activity. EY said this growth backdrop will be considered alongside the inflationary pressures visible across the economy.
The combination of resilient growth and persistent price pressures could therefore play an important role in the RBI’s assessment of its monetary policy stance.
RBI Repo Rate Currently At 5.25 Per Cent
The RBI’s Monetary Policy Committee had kept the policy repo rate unchanged at 5.25 per cent at its August 2026 meeting. The central bank also maintained a neutral policy stance at that meeting.
The repo rate is the rate at which the RBI lends money to commercial banks against eligible securities. Changes in the policy rate can influence borrowing costs across the economy, including loans linked to external benchmarks.
With the August decision leaving the repo rate unchanged, the October meeting will be closely watched for any change in the central bank’s stance or policy rate.
October 7 Key Date For RBI Policy Decision
The next MPC meeting is scheduled to take place from October 5 to October 7, 2026. The RBI is expected to announce its policy decision on October 7.
Ahead of the meeting, EY’s assessment indicates that developments in crude oil prices, currency movements, inflation readings, money supply growth, global interest rates and domestic economic activity will be among the key factors shaping the policy discussion.
