EY Forecasts 25 Basis Point Repo Rate Hike by RBI in October

The upcoming Monetary Policy Committee meeting, scheduled for October 5–7, 2026, will force policymakers to navigate a complex landscape of supply-side constraints and monetary expansion. EY notes that M3 money supply growth averaged 15.0 percent between June and August 2026, signaling high liquidity that complicates inflation control efforts. These domestic factors are exacerbated by the recent 25-basis-point rate hike implemented by the US Federal Reserve, which further tightens global financial conditions.

Despite these pressures, India’s economic resilience remains a critical variable. Real GDP growth reached 7.8 percent in the first quarter of fiscal year 2027, providing the RBI with a buffer to prioritize price stability over aggressive growth stimulation. During its August session, the committee opted to hold the repo rate at 5.25 percent under a neutral stance, but the convergence of rising WPI and CPI indices suggests that this position is increasingly difficult to sustain. The final decision, expected October 7, will likely signal a shift toward a more restrictive monetary environment.