The Reserve Bank of India decides on interest rates on Wednesday, and markets expect a hike. Here is what matters.

The repo rate is the rate at which the RBI lends to banks. It currently stands at 5.25 percent after 125 basis points of cuts in 2025. Nearly 60 percent of economists expect a 25-basis-point rise, the first in almost four years.

Why now? Inflation hit 4.82 percent in August, above the 4 percent target for a third straight month. Growth is holding up at 7.8 percent, so the central bank feels it can act without hurting the economy.

A hike makes borrowing costlier for homes, cars and companies, which cools demand and prices. It also supports the rupee and can pull foreign money into Indian bonds.

Watch the guidance as much as the decision. If the RBI signals a full tightening cycle, as some economists expect, borrowing costs could keep rising into next year.