Mumbai, Oct 5: Expectations of a rate hike by the Reserve Bank of India (RBI) have increased ahead of its upcoming monetary policy decision, as inflationary pressures strengthen while economic growth continues to show resilience.

According to a report, nearly 60 per cent of economists surveyed expect a 25-basis-point increase in the repo rate at the RBI’s policy meeting on Wednesday. Financial markets are also increasingly pricing in the possibility of higher borrowing costs in the months ahead.

If implemented, the rate increase would mark the RBI’s first hike in nearly four years, taking the benchmark repo rate above its current level of 5.25 per cent. The rate has remained at this level for around 10 months.

The RBI had reduced the repo rate by a cumulative 125 basis points during 2025, bringing it down from 6.5 per cent to 5.25 per cent. The expected change in policy direction reflects the evolving economic environment, particularly the need to keep a close watch on inflation while maintaining financial stability.

According to the report, economists believe the central bank may have less reason to wait as price pressures appear to be broadening and global monetary conditions are becoming less supportive. A measured rate increase could help keep inflation expectations anchored without significantly disrupting domestic economic activity.

The potential move could have a direct impact on businesses and consumers. Higher interest rates generally raise borrowing costs for companies and households, which can influence business expansion, housing demand, consumer spending and investment decisions. At the same time, tighter monetary policy can help moderate inflationary pressures and support overall financial stability.

Market expectations also point to the possibility of further rate increases over the next year, depending on how inflation, economic growth and global financial conditions evolve.

For businesses and investors, the RBI’s decision will therefore be closely watched. Any change in the policy rate could influence bank lending rates, bond yields, equity markets, the rupee and the broader investment climate.

The policy challenge for the central bank will be to strike the right balance between containing inflation and preserving the momentum of India’s economic growth.