Inflationary concerns due to costlier oil imports and a weakening rupee could prompt the Reserve Bank of India to raise the repo rate by 25 basis points (bps) in the upcoming monetary policy review, which is scheduled to be announced on October 5.
Also, with a rate hike, the RBI could attempt to stem the increasing foreign exchange outflows — foreign portfolio investors are seen to prefer safe-haven investment in the US in the backdrop of that country’s escalating trade war with China, and given the Federal Reserve’s latest rate hike.
