RBI Hikes Repo Rate to 5.5%

The Reserve Bank of India (RBI) has increased its benchmark repo rate by 25 basis points to 5.5%, marking its first rate hike in more than three years. The move comes as the central bank seeks to keep inflationary pressures under control amid persistent global and geopolitical uncertainties.
The last increase in the repo rate was announced in February 2023, when the RBI raised it by 25 basis points to 6.5%. The central bank subsequently maintained the rate during 2023-24 before entering a rate-cutting phase in 2025.

RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) unanimously approved the latest rate increase during its bi-monthly policy meeting.
The central bank has retained a positive outlook for the economy, forecasting real GDP growth at 7.1% for the current financial year. Growth is expected to stand at 7.2% in the second quarter, 6.9% in the third and 6.8% in the fourth quarter.
The RBI has also revised its annual inflation forecast upward to 5.2% from the earlier estimate of 5.1%. Inflation is projected at 4.9% in Q2, 6% in Q3 and 5.7% in Q4. Retail inflation had risen to 4.82% in August from 4.45% in July.

Alongside the rate hike, the MPC shifted its policy stance from ‘neutral’ to ‘calibrated tightening’. While all six members backed the repo rate increase, four supported the change in stance, while two favoured retaining the neutral approach.