The Reserve Bank of India has not raised interest rates since February 2023. On Wednesday, Oct. 7, it may end that run. A Business Standard poll published on Oct. 2 found eight of 10 economists expect the central bank's Monetary Policy Committee to raise the repo rate by 25 basis points to 5.50%, which would start a hiking cycle for the first time in more than three years.

The case rests on oil, a weak rupee and a strong economy. The case against it is that inflation is still inside the official target band.

The Poll Behind the Headline

The six-member Monetary Policy Committee meets from Oct. 5 to 7. The repo rate has sat at 5.25% for the past four reviews, after cumulative cuts of 125 basis points in 2025, Business Standard reported. Barclays economists Aastha Gudwani and Amruta Ghare expect the first hike on Oct. 7 and see the terminal rate at 5.75%. Aditi Nayar, chief economist at Icra, called a pre-emptive October hike appropriate, with another possible in December depending on prices.

Not everyone agrees on timing. An Informist poll cited by BW Businessworld found only four of 16 economists expecting a hike in October, with the rest looking to a later meeting. A hike is the majority view, not the consensus.

Why Hike Now

Retail inflation rose to 4.8% in August from 4.45% in July, according to Business Standard. The official mandate is 4% with a tolerance of two points either way, so the number is still inside the band, but moving toward its upper half. Reuters reported that price pressures have broadened across more of the consumer basket.

Oil is the biggest driver. Crude has stayed above $100 a barrel in recent weeks, and Nayar warned that retail petrol and diesel prices may need to rise by as much as ₹8 to ₹9 per litre at current crude prices, which would spread inflation further. Gaura Sen Gupta, chief economist at IDFC First Bank, expects inflation to average 5.2% in the 2026-27 fiscal year, above the RBI's own 5% estimate.

Then there is the rupee, which has weakened about 6% against the dollar this year, Reuters reported. A weaker rupee makes imported oil costlier, feeding inflation again. And growth gives the RBI room: GDP expanded 7.8% in April-June, 80 basis points above the central bank's projection.

The Case for Waiting

Madan Sabnavis, chief economist at Bank of Baroda, was the only respondent in the Business Standard poll who expects no change. A hike just before the festival season, he argued, would do little to improve transmission to deposit rates, especially with inflows under the FCNR(B) scheme, which lets non-resident Indians keep foreign-currency deposits in Indian banks. He said the RBI can wait for one more policy.

My own view: waiting has a real logic. Inflation at 4.8% is inside the band, and a supply shock driven by oil is something interest rates handle poorly, a point central banks elsewhere are discovering. The risk of acting early is choking a strong recovery to fight a price spike that may fade. The risk of waiting is that a falling rupee and a broadening basket make a larger hike necessary later.

What It Would Mean for Borrowers and Savers

A quarter-point hike would ripple through floating-rate loans linked to the repo rate, pushing up EMIs on some home and car loans, though the exact effect depends on each lender's terms. Savers would gain only if banks raise deposit rates, which, as Sabnavis noted, may lag. This is general information, not personal financial advice, and borrowers should check their own loan contracts.

A Global Pattern

India would join a growing group. Business Standard noted that the US, UK and Japan have already moved toward tighter policy. Blogerroom covered Australia's move in its report on the RBA's hike to 4.60% and Japan's in its look at the Bank of Japan's 31-year-high rate.

The common thread is energy. Talks over the Strait of Hormuz stalled when the US rejected Iran's terms, and importers like India feel the price of that stalemate through both their fuel bills and their currencies.

What to Watch on Oct. 7

Beyond the rate itself, watch four signals. First, the vote: a split committee would say a lot about the pace of future hikes. Second, the stance, which most poll respondents expect to remain neutral. Third, the RBI's forecasts, since most respondents expect it to raise its 5% inflation projection and its 6.7% growth estimate. Fourth, liquidity: with the weighted average call rate below the repo rate, Barclays expects continued absorption measures.

If the RBI holds, expect more questions about the rupee. If it hikes, the next question is whether December brings another.