ECONOMY
RBI hikes Repo Rate by 25 bps after four years as inflationary pressures gather
- IBJ Bureau
- Oct 08, 2026
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday raised the policy Repo Rate under the liquidity adjustment facility (LAF) by 25 basis points (bps) to 5.50 per cent.
The central bank shifted its stance to “calibrated tightening” from “neutral”, signalling that rate cuts are off the table in the near term.
The sudden re-escalation of the West Asia conflict in September and the consequent hardening and volatility in global crude oil prices have soured global economic sentiment and unsettled financial markets, RBI Governor Sanjay Malhotra said.
On the rationale for the MPC’s decision, the Governor added, “The MPC noted that the global context on account of geopolitical developments remains challenging. Nonetheless, the Indian economy has been strong, and the economic momentum remains broad-based. Moreover, the economy is expected to remain resilient.”
The real GDP growth for FY27 is projected at 7.1 per cent, while the CPI inflation is now projected at 5.2 per cent.
“Headline CPI inflation is expected to averagealmost 5.8 per cent in the next three quarters,” Mr Malhotra said, adding, “In this milieu, recalibrating the policy rate is imperative.”
Wednesday’s hike marked the first increase in the policy rate in nearly four years amid mounting inflation and strong economic growth.
India has joined major central banks in raising rates as higher oil prices triggered by the Iran war fuel inflation, squeeze purchasing power and weigh on currencies.
Weak monsoon rains linked to El Nino have compounded price pressures in Asia’s third-largest economy.
Report By
View Reporter News