RBI raises repo rate by 25 basis points to 5.50%, first hike in nearly four years

The Reserve Bank of India raised its benchmark repo rate by 25 basis points to 5.50 per cent on Wednesday, delivering its first rate hike since February 2023 as the central bank confronts mounting inflation alongside strong economic growth. ET Now

The six-member Monetary Policy Committee voted unanimously in favour of the increase, and shifted the policy stance from “neutral” to “calibrated tightening”, ruling out near-term rate cuts. Reuters The Hindu BusinessLine

“It is clear that the outlook for inflation is no longer benign,” Governor Sanjay Malhotra said in his policy address. Reuters

Consumer inflation accelerated to 4.82 per cent in August, remaining above the RBI’s 4 per cent medium-term target for a third consecutive month, up from 4.5 per cent in July as food and fuel prices rippled through the economy. Reuters The Hindu BusinessLine

Growth remained robust: GDP for the April–June quarter stood at 7.8 per cent, well above the central bank’s own forecast of 7 per cent, giving policymakers room to tighten. Reuters

The RBI also raised its real GDP growth projection for FY27 to 7.1 per cent and its CPI inflation forecast for the year to 5.2 per cent, while lifting the marginal standing facility rate and the bank rate to 5.75 per cent. The Hindu BusinessLine

The move reverses the monetary easing cycle of 2025, when the central bank cut the repo rate by a cumulative 125 basis points before keeping it unchanged for four consecutive policy reviews. ET Now