Investors are betting that the Reserve Bank of India will raise interest rates this week, warning it risks falling behind as inflation quickens.

Nearly 60 percent of economists polled by Reuters, 35 of 61, expect a 25-basis-point hike at the policy meeting on Wednesday. Swap markets have fully priced in an increase. If delivered, it would be the first hike in nearly four years, lifting the benchmark repo rate from 5.25 percent, where it has sat for almost 10 months.

The central bank cut rates by a cumulative 125 basis points in 2025, from 6.5 to 5.25 percent. But consumer inflation rose to 4.82 percent in August, above the 4 percent target for a third straight month, while the economy grew 7.8 percent in the April-June quarter.

Bank of America economist Rahul Bajoria expects the bank to begin a 100-basis-point tightening cycle in October, saying the time to take away the punchbowl has come.

The decision and its guidance will shape expectations for borrowing costs and capital flows in the months ahead.