The Reserve Bank of India may raise interest rates next week. A Reuters poll says most economists expect a 25 basis point hike to 5.50 percent at the October 5-7 meeting.

It would be the first rate hike since February 2023. The current repo rate is 5.25 percent.

So what is the repo rate? It is the rate at which the RBI lends to banks. When it rises, banks usually raise the rates they charge you.

Why a hike now? Inflation hit 4.82 percent in August. That is above the RBI’s 4 percent target for the third straight month. Prices are rising across nearly half of the inflation basket.

What does it mean for you? If you have a floating-rate home or car loan, your EMI could go up. New loans may also get costlier. Fixed deposits could earn slightly more.

The economy gives the RBI room to act. Growth was near 8 percent in the April-June quarter. Bank credit grew over 19 percent in July.

A weak rupee adds pressure. It ended at 96.31 per dollar, a two-month low. Costlier imports feed inflation. The decision will be watched closely.