New Delhi [India], September 28 : The case for a 25 basis point hike in the Reserve Bank of India's (RBI) repo rate has strengthened due to higher crude oil prices, a weaker rupee and tighter global financial conditions, according to a report by EY.
The report said recent trends in the Wholesale Price Index (WPI) and Consumer Price Index (CPI) point to persistent inflationary pressure, mainly driven by cost-push and supply-side factors.
EY said, “chances for a change in the RBI’s policy stance and a 25-basis-point hike in the repo rate are high”.
The report attributed part of the pressure to an El Niño-linked deficient monsoon and rising global crude oil prices, which have contributed to higher food prices. It also flagged relatively high money supply growth, with average M3 growth at 15.0 per cent during June to August 2026.
M3 growth refers to the increase in the total amount of money available in the economy, including cash and bank deposits. Higher M3 growth means more money is circulating in the financial system.
The report said the RBI is likely to consider four key factors at its October 2026 Monetary Policy Committee (MPC) meeting -- the recent 25 basis point US Federal Reserve rate hike, India's comfortable growth situation, persistent increases in WPI and CPI, and sustained M3 growth above trend.
India's real GDP growth stood at 7.8 per cent in the first quarter of FY27, indicating continued strength in economic activity.
EY said this growth performance will be an important consideration alongside the price pressures facing the economy.
The report highlighted that the combination of these factors has increased the likelihood of a change in the RBI's policy stance and a 25 basis point increase in the repo rate.
The RBI's monetary policy committee kept the policy repo rate unchanged at 5.25 per cent and retained a neutral stance during its August 2026 meeting.
The central bank's next MPC meeting is scheduled from October 5 to October 7, 2026, with the policy decision due on October 7.