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RBI Raises Repo Rate by 25 Basis Points to 5.50 Percent in October Meeting
Reported by Vivek Joshi (Copy Editor) · Livemint - Markets ·
Confirmed by a second source: Business Standard - Top Stories
Photo: Wikimedia CommonsRate Decision
The Reserve Bank of India raised the repo rate by 25 basis points to 5.50 percent on Wednesday, 7 October. This is the first rate hike since February 2023, when the central bank last raised rates by 25 basis points. All members of the Monetary Policy Committee voted unanimously to approve the hike. The committee also voted in a 4-2 majority to shift the policy stance to calibrated tightening.
Growth and Inflation
Governor Sanjay Malhotra stated that rate cuts are not likely in the near future, while noting that further hikes or a pause remain possible. He highlighted risks from global inflation, elevated oil prices, tighter global conditions, and food inflation threats from bad weather. Despite these pressures, the RBI increased its real GDP growth forecast for the financial year 2026-27 to 7.1 percent, up from the previous 6.7 percent estimate. The Q2FY27 GDP growth forecast rose to 7.2 percent, Q3 grew to 6.9 percent, while Q4 remained unchanged at 6.8 percent, and Q1FY28 was lowered to 7.1 percent.
Context
The Reserve Bank of India regularly adjusts key interest rates to manage inflation and support economic growth in the country. Central banks use tools like the repo rate to control the money supply in the financial system when price pressures rise.
ExplainerWhy this matters
What Happened
The Reserve Bank of India raised its key lending rate, the repo rate, for the first time since February 2023, bringing it to 5.50 percent, and shifted its policy stance to calibrated tightening to combat rising price pressures.
Why It Matters
When the central bank raises the repo rate, borrowing costs go up for commercial banks, which usually leads to higher interest rates on home loans, car loans, and personal loans for regular consumers. At the same time, higher rates aim to cool down inflation by making borrowing and spending more expensive, protecting the purchasing power of money over time.
What Happens Next
Borrowers should prepare for banks to raise their lending rates in response to the policy change. Economists and markets will closely watch upcoming inflation data and global oil price movements to see if the central bank will introduce further rate hikes or hold rates steady at future policy meetings.
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