The Reserve Bank of India’s Monetary Policy Committee (MPC) unanimously raised the policy repo rate by 25 basis points to 5.50% and shifted to a calibrated-tightening stance, citing a less benign inflation outlook, widening price pressures and resilient, broad-based growth, although two members preferred a neutral stance. The rate had been cut 25 basis points to 5.25% in December 2025 and held there through August 2026. The standing deposit facility rate rose to 5.25%, while the marginal standing facility rate and Bank Rate increased to 5.75%. Consumer price index inflation rose to 4.8% in August and is projected at 5.2% in 2026-27, while real GDP growth is forecast at 7.1% after stronger-than-expected first-quarter growth, with robust credit flows supporting investment but strong monetary and credit growth posing inflation risks. Globally, renewed conflict in West Asia and volatile crude prices have coincided with hawkish policy shifts, tighter financial conditions and record-high bond yields. The MPC said rate cuts are off the table in the near term and the next action will be either a hike or a pause, depending particularly on underlying inflation, the broadening of price pressures and second-round effects.
Reserve Bank of India Raises Policy Repo Rate by 25 Basis Points to 5.50%
The Reserve Bank of India’s Monetary Policy Committee unanimously raised the policy repo rate by 25 basis points to 5.50% and adopted a calibrated-tightening stance, although two members preferred neutral. Citing broadening inflation pressures and resilient growth, the committee ruled out near-term cuts and said its next move would be a hike or pause.