The odds of a Reserve Bank of India rate hike at the October monetary policy meeting are rising, economists say. Nomura now assigns a 60 percent probability to a 25 basis-point increase in October, against 40 percent for a hold, calling the decision a close call.

HSBC expects two 25 basis-point hikes, in October and December, taking the repo rate to 5.75 percent. The central bank has held the repo rate at 5.25 percent, but retail inflation hit a 20-month high of 4.82 percent in August, well above the 4 percent target.

Pressure is building on several fronts. Brent crude averaged about 101 dollars a barrel in September, food inflation touched 5.7 percent in August, and the RBI has drained surplus liquidity to below 5 lakh crore rupees from a peak of around 10 to 11 lakh crore.

DBS Bank economist Radhika Rao said the RBI's inflation mandate has reinforced the push to tighten. HSBC expects further steps to drain excess liquidity to be spelled out at the October meeting.

A 25 basis-point October hike would be the first rate increase since February 2023; economists expect a shallow cycle totalling 50 to 75 basis points this financial year.