RBI MPC meet: Why your borrowing costs may go up from October
High oil prices and weak monsoon, which will weigh on food prices, are likely to push up inflation, and in this backdrop, RBI may raise the repo rate by 25 bps each in October and December, feels D. K. Joshi, Chief Economist at Crisil
- Sep 30, 2026,
- Updated Sep 30, 2026 6:28 PM IST
Are you a home-loan borrower? Your interest rate may go up come October. Higher oil prices in the backdrop of the conflict in West Asia, coupled with a poor monsoon, which could drive up food prices, is likely to put upward pressure on inflation.
At the same time, given that GDP growth has been strong, the Reserve Bank of India's monetary policy committee (MPC) may look to raise the repo rate (benchmark rate at which RBI lends money to commercial banks) by 25 basis points (0.25%) in the upcoming meeting next week and perhaps follow it up with another similar hike in December, feel some economists.
"Monetary policy is on the verge of turning. We are anticipating one rate hike in October and possibly another in December," said D. K. Joshi, chief economist at Crisil.
READ THIS: FD rates before RBI MPC meet: These small finance banks offer 8%+ interest on fixed deposits
Risks are evolving, and some of them are becoming part of the baseline, he noted.
"You will have to incorporate monsoon and slightly higher prices somewhere in the outlook. From an inflation point of view, in supply shocks, there is some persistence developing," said Joshi.
Inflation had already been on an upswing. As per the latest available data, CPI (consumer price index) inflation rose 4.82% in August from 4.45% in July. In the same period, food inflation increased to 5.95% from 5.52%.
Inflation is expected to rise given crude oil prices have shot up again in recent weeks. More importantly, deficient rainfall will weigh on farm prices in the coming months, which will also exert upward pressure on inflation. According to the Indian Meteorological Department (IMD), as of September 28, rainfall deficit in the country had been 12%. Additionally, reservoir levels have also fallen below the decade-long average, which will have a bearing on the winter crop.
Crisil's Joshi is not the only one expecting the RBI MPC to begin rate hikes in October.
Nomura is also expecting two rate hikes, starting with a 25 bps raise on October 7.
"The RBI may deliver a 25-bps hike in October, see how things happen, probably deliver another 25-bps hike in December, and that will sort of raise the policy rate above neutral," said Aurodeep Nandi, economist at Nomura.
He is also expecting this to be a shallow rate hike cycle and post December, should inflation start moderating and pressures remain manageable, the Reserve Bank may then leave interest rates on hold, Nandi felt.
If RBI does hike interest rates next week, it will follow other major central banks that have turned to rate hikes to tame inflation amid the geopolitical uncertainties.
The US Federal Reserve recently raised its rates by 25 bps—its first in three years. Bank of Japan, too, raised rates to a 31-year high. The European Central Bank also raised its key rates in September.
Pranjul Bhandari, Chief India Economist at HSBC, is also expecting two 25-bps rate hikes in October and December, respectively. She sees inflationary risks as stickier and feels retail inflation could stay above 5.5% for three quarters.
ALSO READ: Inflation may cross 6.5%: SBI Research sees RBI hiking repo rate in October, December
"Acting early signals a response to prospective inflation, strengthening credibility. That can do more than the mechanical impact of a 25-bps hike as it anchors expectations, supports the currency, and reduces the inflation risk premium," noted Bhandari.
Meanwhile, despite the geopolitical uncertainties and monsoon worries, Crisil still expects India's GDP to grow 7% in the current financial year. This, while fairly strong, will be slower than the 7.7% growth clocked in FY26.
"I think the two luck factors that played out last year were good monsoons and the oil was $70 a barrel. This year is going to be much more than that, and monsoon, there are some regions being declared, drought hit. So, there will be some downside to growth compared to last year, " said Joshi of Crisil.
While first quarter growth at 7.8% was better than market expectations, Joshi noted that data is pointing to second quarter growth also being resilient. However, growth in the second half of the year will be slower, he said.
Are you a home-loan borrower? Your interest rate may go up come October. Higher oil prices in the backdrop of the conflict in West Asia, coupled with a poor monsoon, which could drive up food prices, is likely to put upward pressure on inflation.
At the same time, given that GDP growth has been strong, the Reserve Bank of India's monetary policy committee (MPC) may look to raise the repo rate (benchmark rate at which RBI lends money to commercial banks) by 25 basis points (0.25%) in the upcoming meeting next week and perhaps follow it up with another similar hike in December, feel some economists.
"Monetary policy is on the verge of turning. We are anticipating one rate hike in October and possibly another in December," said D. K. Joshi, chief economist at Crisil.
READ THIS: FD rates before RBI MPC meet: These small finance banks offer 8%+ interest on fixed deposits
Risks are evolving, and some of them are becoming part of the baseline, he noted.
"You will have to incorporate monsoon and slightly higher prices somewhere in the outlook. From an inflation point of view, in supply shocks, there is some persistence developing," said Joshi.
Inflation had already been on an upswing. As per the latest available data, CPI (consumer price index) inflation rose 4.82% in August from 4.45% in July. In the same period, food inflation increased to 5.95% from 5.52%.
Inflation is expected to rise given crude oil prices have shot up again in recent weeks. More importantly, deficient rainfall will weigh on farm prices in the coming months, which will also exert upward pressure on inflation. According to the Indian Meteorological Department (IMD), as of September 28, rainfall deficit in the country had been 12%. Additionally, reservoir levels have also fallen below the decade-long average, which will have a bearing on the winter crop.
Crisil's Joshi is not the only one expecting the RBI MPC to begin rate hikes in October.
Nomura is also expecting two rate hikes, starting with a 25 bps raise on October 7.
"The RBI may deliver a 25-bps hike in October, see how things happen, probably deliver another 25-bps hike in December, and that will sort of raise the policy rate above neutral," said Aurodeep Nandi, economist at Nomura.
He is also expecting this to be a shallow rate hike cycle and post December, should inflation start moderating and pressures remain manageable, the Reserve Bank may then leave interest rates on hold, Nandi felt.
If RBI does hike interest rates next week, it will follow other major central banks that have turned to rate hikes to tame inflation amid the geopolitical uncertainties.
The US Federal Reserve recently raised its rates by 25 bps—its first in three years. Bank of Japan, too, raised rates to a 31-year high. The European Central Bank also raised its key rates in September.
Pranjul Bhandari, Chief India Economist at HSBC, is also expecting two 25-bps rate hikes in October and December, respectively. She sees inflationary risks as stickier and feels retail inflation could stay above 5.5% for three quarters.
ALSO READ: Inflation may cross 6.5%: SBI Research sees RBI hiking repo rate in October, December
"Acting early signals a response to prospective inflation, strengthening credibility. That can do more than the mechanical impact of a 25-bps hike as it anchors expectations, supports the currency, and reduces the inflation risk premium," noted Bhandari.
Meanwhile, despite the geopolitical uncertainties and monsoon worries, Crisil still expects India's GDP to grow 7% in the current financial year. This, while fairly strong, will be slower than the 7.7% growth clocked in FY26.
"I think the two luck factors that played out last year were good monsoons and the oil was $70 a barrel. This year is going to be much more than that, and monsoon, there are some regions being declared, drought hit. So, there will be some downside to growth compared to last year, " said Joshi of Crisil.
While first quarter growth at 7.8% was better than market expectations, Joshi noted that data is pointing to second quarter growth also being resilient. However, growth in the second half of the year will be slower, he said.