Investors are betting that the Reserve Bank of India will raise interest rates this week. The central bank risks falling behind as inflation quickens and growth stays strong.

Nearly 60 percent of economists polled by Reuters expect a 25-basis-point hike at the policy meeting on Wednesday. Swap markets are fully pricing in higher borrowing costs.

The six-member Monetary Policy Committee meets from October 5 to 7. Governor Sanjay Malhotra will announce the decision on October 7. If delivered, it would be the RBI’s first rate hike since February 2023. The repo rate has stayed at 5.25 percent for nearly ten months.

Consumer inflation rose to 4.82 percent in August. That is above the RBI’s 4 percent target for a third straight month. Prices across nearly half of the CPI basket are rising at or above the target.

SBI economists want a pre-emptive hike to 5.50 percent. They expect the RBI to raise its FY27 GDP forecast from 6.7 percent to 7.0 percent and its inflation forecast from 5.0 percent to 5.2 percent.

Brent crude above 100 dollars a barrel and a weaker rupee are adding to imported inflation pressure. India’s economy grew 7.8 percent in the April-June quarter.