RBI Raises the Repo Rate by 25 Basis Points to 5.50% and Shifts to a ‘Calibrated Tightening’ Stance, Its First Hike Since February 2023

The Reserve Bank of India raised its policy repo rate by 25 basis points to 5.50% on 7 October 2026, moving its stance from “neutral” to “calibrated tightening”. The decision came at the end of the 63rd meeting of the Monetary Policy Committee, which met from 5 to 7 October under Governor Sanjay Malhotra. The repo rate had stood at 5.25% after the August meeting, and reports describe this as the first increase since February 2023.

The other policy rates moved with it. The Standing Deposit Facility rate is 5.25%, while the Marginal Standing Facility rate and the Bank Rate both rose to 5.75%. The committee voted unanimously for the rate increase. According to the SCC Online summary of the statement, two external members, Dr Nagesh Kumar and Prof. Ram Singh, would have preferred to keep the stance neutral.

The committee said that “inflationary pressures are no longer as benign as they were last year”. It pointed to higher food and fuel prices and to signs that core inflation is broadening. It listed geopolitical tensions, crude oil volatility, a deficient monsoon, El Niño-related weather disruption and tighter global financial conditions as risks.

The RBI projects real GDP growth of 7.1% for 2026-27 and consumer price inflation of 5.2% for the year. By quarter, it expects inflation of 4.9% in July–September, 6.0% in October–December and 5.7% in January–March. It estimates core inflation at 4.4% for the year, and the committee said it expects headline inflation to average close to 5.8% over the next three quarters.

The committee signalled that rate cuts are off the table for now, and that the next move could be a hike or a pause depending on the growth and inflation outlook. The minutes of the meeting are due on 21 October, and the next meeting is scheduled for 2 to 4 December. Borrowers with loans linked to the repo rate should expect lenders to pass on the increase when their loans reset.

Sources: SCC Online: RBI hikes repo rate to 5.50%; Reserve Bank of India press releases.

Featured image: The Reserve Bank of India headquarters in Mumbai (cropped). Photo by DesiBoy101, licensed under CC BY 4.0, via Wikimedia Commons.