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Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Clear out junk files and repair common Windows errorsFree Scan →Scan for outdated or missing drivers - takes under a minuteDriver Scan →As of October 5, 2026, a rate increase by India’s Reserve Bank (RBI) was widely expected but had not been announced. In a Reuters poll, 35 of 61 economists forecast a 25-basis-point increase at the October 7 meeting, while swap markets priced in a rise. Those were expectations—not a policy decision.
Why a rate increase was expected
The case for tightening rested mainly on inflation moving above the RBI’s medium-term target, sturdy economic growth and a tougher global interest-rate backdrop. Together, those factors gave policymakers reason to consider prioritizing price stability, but they did not make a hike inevitable.
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Inflation was above target and spreading
Reuters reported that consumer inflation reached 4.82% in August, above the RBI’s 4% medium-term target for a third consecutive month. The reported monthly readings rose from 3.93% in May to 4.38% in June, 4.45% in July and 4.82% in August. Reuters also said prices were rising at or above 4% across nearly half of the consumer-price basket, up from about one-third in March. That breadth measure was reported by Reuters, rather than presented as an independently retrieved official statistical table. Reuters, September 28, 2026; Reuters, October 5, 2026
Growth remained resilient
Reuters reported that the economy grew 7.8% year over year in April–June 2026. It also reported bank-credit growth of more than 19% in July, nearly double its pace a year earlier. These figures supported the argument that the economy might be able to absorb tighter policy, though they do not by themselves establish how a rate increase would affect households or businesses. Reuters, September 28, 2026; Reuters, October 5, 2026
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The RBI had room to wait, too
At its August 2026 meeting, the RBI held the repo rate at 5.25% for a fourth consecutive bi-monthly review. PTI reported that the last increase had been in February 2023, when the rate reached 6.50%, followed by cuts in 2025. The August hold reflected policymakers’ interest in seeing whether inflation pressure was becoming general rather than remaining concentrated. PTI, October 2026
There was also a credible argument for caution. In a PTI poll, Larsen & Toubro group chief economist Sachchidanand Shukla said the RBI could wait because “there is no evidence yet of demand-led inflation or overheating in the economy.” The distinction matters: inflation above target is a concern, but policymakers may weigh its causes and persistence before tightening.
What “peers turn hawkish” means
Reuters reported that central banks in the United States, Japan, Europe, Indonesia, the Philippines and South Korea, among others, had raised borrowing costs during the period covered by its report. When interest rates rise abroad, India’s relative yield advantage can narrow. That may affect investor appetite for Indian debt and add to pressure on capital flows and the rupee. Reuters also reported nearly $26 billion in overseas investor withdrawals from Indian equities so far in 2026 as of September 28. Reuters, September 28, 2026
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How strong was the expectation of a hike?
Economist polls and market pricing pointed toward an increase, but neither represented an RBI commitment. The polls also shifted as the meeting approached.
| Measure | What it indicated | How to read it |
|---|---|---|
| Reuters poll, September 28 | 38 of 61 economists expected an increase. | A dated survey result, not a decision. Reuters |
| Reuters poll, October 5 | 35 of 61 economists expected a 25-basis-point increase at the October 7 meeting. | A later survey; the count should not be combined with the September 28 poll. Reuters |
| Swap-market pricing, October 5 | Markets priced about 100 basis points of increases over 12 months and 140 basis points over 24 months. | Market-implied pricing, not guaranteed RBI action. Reuters |
| Named bank forecasts, October 5 | Nomura and Barclays expected 25–50 basis points of tightening; BofA and ANZ expected 75–100 basis points. | Different analyst forecasts for the prospective cycle, not a consensus or policy commitment. Reuters |
PTI separately reported that most economists and bankers in its poll expected an increase. But the range of views on the total amount of tightening showed that even forecasters expecting a first move did not agree on how long or large a cycle might be.
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What the RBI’s outlook could signal
The rate decision would be only one clue about the likely policy path. Reuters said investors would also watch for updated growth and inflation projections and any change in the RBI’s “neutral” stance. PTI reported that the RBI’s August projections put FY27 headline CPI inflation at 5.0%, with quarterly projections of 4.7% in Q2, 5.9% in Q3 and 5.5% in Q4; core inflation was projected at 4.3%. These were forecasts summarized by PTI, not realized inflation readings. PTI, October 2026
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PTI also reported RBI real-GDP growth projections of 6.7% for FY27: 7.0% in Q1, 6.4% in Q2, 6.5% in Q3 and 6.8% in Q4, followed by 7.3% for Q1 2027–28. A revised outlook could change how markets interpret the balance between inflation risks and growth. Ahead of the meeting, PTI reported that economists expected the RBI to raise its FY27 inflation forecast; that was an expectation, not a confirmed revision. PTI, October 2026
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What to watch for in the decision
- The immediate rate move: whether the RBI raised the repo rate, held it, or chose another course at the October 7 meeting.
- The policy stance: PTI reported differing expectations, including no change, calibrated tightening or withdrawal of accommodation. A change in stance could shape expectations even if the first rate move were 25 basis points.
- The inflation outlook: updated forecasts would indicate how policymakers viewed the persistence and breadth of price pressures.
- The growth outlook: revisions could reveal how much weight the RBI placed on resilient activity versus the risk that tighter policy could slow it.
The decision was still pending in the October 5 reporting. Until the RBI announced it, talk of a new hiking cycle remained a forecast; the duration and cumulative size of any cycle were even less certain.
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