RBI May Hold Repo Rate in October, Rate Hikes Could Start in December: BoB

RBI May Hold Repo Rate in October, Rate Hikes Could Start in December: BoB

New Delhi, Oct 5: The Reserve Bank of India (RBI) may keep the repo rate unchanged at 5.25 per cent in its October monetary policy meeting, while a rate-hike cycle could begin from December, according to an assessment by Bank of Baroda.

The bank expects the RBI to maintain its neutral policy stance in October as it continues to monitor inflation, economic growth, crude oil prices and global financial conditions.

Bank of Baroda expects the RBI to raise the repo rate by a total of 50-75 basis points in the next tightening cycle, starting in December. However, the timing and pace of any future rate changes will depend on how inflation and other economic indicators develop.

India’s economy continues to show strong growth, giving the central bank some room to assess the situation before making a change in interest rates. Bank of Baroda expects India’s GDP growth to remain around 7-7.2 per cent in FY27.

Inflation is also an important factor for the RBI. Retail inflation has moved higher in recent months, mainly due to food prices, while core inflation has remained relatively moderate.

The banking system is also seeing surplus liquidity, while credit growth remains healthy across several sectors. These factors could influence the RBI’s approach to monetary policy in the coming months.

Global developments will remain another key factor. Changes in crude oil prices, movements in global interest rates and foreign investment flows can affect India’s inflation outlook, the rupee and bond yields.

If the RBI keeps the repo rate unchanged in October, it would give policymakers more time to assess these developments before considering a possible rate increase later in the year.

For borrowers, businesses and financial markets, the October policy decision and the RBI’s guidance will be closely watched for signals on the future direction of interest rates.