RBI raises repo rate to 5.50 percent and shifts stance to calibrated tightening

UPDATE - follow-up to RBI MPC meeting LIVE updates: MPC hikes repo rate by 25 basis points to 5.50%:

What Happened

The Reserve Bank of India has raised the policy repo rate by 25 basis points to 5.50 percent and shifted its stance from neutral to calibrated tightening. Governor Sanjay Malhotra stated that rate cuts are off the table in the near term as inflation pressures rise due to the continuing West Asia conflict and volatile global crude prices. Real GDP growth for the financial year 2027 is projected at 7.1 percent, while CPI inflation is projected at 5.2 percent, with headline inflation expected to average nearly 5.8 percent in the next three quarters and core inflation projected at 4.4 percent this fiscal year.

Reactions And Changes

Hero FinCorp MD and CEO Abhimanyu Munjal noted that higher rates will impact NBFC funding costs, while EEPC India chairperson Pankaj Chadha pointed out that engineering goods exports grew 19.55 percent in the April-August 2026 period. ANAROCK Group chairperson Anuj Puri stated that dearer home loans will extend buyer decision timelines in price-sensitive segments. Kotak Mahindra Bank chief economist Upasna Bhardwaj expects another 25 to 50 basis points of rate hikes ahead. Additionally, the RBI announced interoperability among NBFC-Account Aggregators and enabled SEBI-regulated depositories to include deposit account information in consolidated account statements.

Context

The central bank uses repo rate adjustments to manage money supply and rein in rising prices when external economic shocks threaten domestic stability. This monetary tightening follows a prior easing cycle where the rate had been reduced by 125 basis points from 6.50 percent down to 5.25 percent before these recent hikes.