The Reserve Bank of India’s Monetary Policy Committee on Wednesday raised the policy repo rate by 25 basis points to 5.50 per cent from 5.25 per cent, citing rising inflation risks and an uncertain global environment.
The rate increase is the first hike in the repo rate since February 2023. Along with the rate decision, the RBI changed its monetary policy stance from neutral to calibrated tightening.
Editorial Insight
Key Highlights
Important points readers should notice.
Repo rate raised by 25 basis points to 5.50 per cent.
The increase is the first repo-rate hike since February 2023.
Monetary policy stance changed from neutral to calibrated tightening.
SDF rate stands at 5.25 per cent.
MSF rate and Bank Rate stand at 5.75 per cent.
FY27 real GDP growth forecast raised to 7.1 per cent from 6.7 per cent.
Following the repo rate increase, the Standing Deposit Facility rate stands at 5.25 per cent, while the Marginal Standing Facility rate and the Bank Rate stand at 5.75 per cent.
The RBI also raised its projection for India’s real GDP growth in 2026-27 by 40 basis points to 7.1 per cent, from the earlier projection of 6.7 per cent. The central bank said economic activity has remained resilient, while global uncertainties and supply-side risks continue to require close monitoring.
The RBI raised its FY27 CPI inflation projection to 5.2 per cent, from 5 per cent earlier. Its quarterly projections put inflation at 4.9 per cent in the second quarter, 6 per cent in the third quarter and 5.7 per cent in the fourth quarter.
Editorial Analysis
Why This Matters
A higher repo rate can increase borrowing costs across the financial system, depending on how banks and lenders transmit the policy change to lending rates. The shift to calibrated tightening also signals that controlling inflation has become a stronger policy priority.
The central bank said inflation and its outlook were no longer as benign as in the previous year. It also highlighted risks from elevated energy prices, global uncertainties and weather-related factors.
The October policy decision therefore marks a shift toward tighter monetary conditions, with the RBI balancing inflation risks against continued strength in domestic economic activity.
