Archive · 30 Sep 2026
RBI May Raise Rates as Inflation Risks Intensify
Economists think the Reserve Bank of India may raise interest rates soon.
They expect one increase in October and possibly another in December.
Higher interest rates can make loans more expensive for people and businesses.
The main worry is that prices are rising again.
Food prices have increased, and oil has become more expensive.
Rainfall has also been below normal, which could reduce farm production and push food prices higher.
Some economists believe the rate increases will be small and temporary.
They expect the Reserve Bank of India to pause after December if inflation becomes calmer.
Economic growth is still expected to remain strong, but it may slow later in the year.
Crisil, Nomura and HSBC economists expect two 25-basis-point RBI rate hikes, in October and December.
CPI inflation rose to 4.82% in August from 4.45% in July, while food inflation reached 5.95%.
Higher crude oil prices, deficient rainfall and below-average reservoir levels could increase future inflation.
Nomura expects a shallow rate-hike cycle, with rates potentially staying unchanged after December if inflation moderates.
Crisil expects India’s GDP to grow 7% in the current financial year, despite slower growth in the second half.
- Who
- The Reserve Bank of India’s Monetary Policy Committee, along with economists from Crisil, Nomura and HSBC, is central to the discussion.
- What
- The Reserve Bank of India may begin raising its policy interest rate, potentially by 25 basis points in October and again in December.
- When
- The first expected hike is in October, with a possible second hike in December; Nomura specifically expects an October 7 increase.
- Where
- India.
- Why
- Economists cite rising inflation, higher crude oil prices, deficient rainfall and falling reservoir levels as reasons for expecting rate increases.
Arguments for rate hikes
Growth and pause concerns
Inflation management
Arguments for rate hikes
Crisil, Nomura and HSBC economists argue that rising consumer and food inflation, higher oil prices and weather-related supply risks justify early rate increases.
Growth and pause concerns
Nomura expects the cycle to remain shallow and says the Reserve Bank of India could pause after December if inflation pressures become manageable.
Effect on economic growth
Arguments for rate hikes
Pranjul Bhandari of HSBC argues that acting early could anchor inflation expectations, support the currency and reduce the inflation risk premium.
Growth and pause concerns
Crisil’s D. K. Joshi expects growth to slow in the second half of the year because of weaker monsoons and higher oil prices, even though full-year growth may reach 7%.
- Expected rate path
- Two economists expect 25-basis-point hikes in October and December.
- August CPI inflation
- 4.82%, up from 4.45% in July.
- August food inflation
- 5.95%, up from 5.52% in July.
- Rainfall deficit
- 12% nationally as of September 28, according to the Indian Meteorological Department.
- GDP forecast
- Crisil expects India’s GDP to grow 7% in the current financial year.
- Growth comparison
- The projected 7% growth is below the 7.7% growth cited for FY26.
- Expected rate-cycle duration
- Nomura expects a shallow cycle, potentially followed by a pause after December if inflation moderates.