The Reserve Bank of India’s Monetary Policy Committee on Wednesday raised the repo rate by 25 basis points to 5.50%, marking its first rate increase since February 2023. The decision was taken unanimously after the MPC’s three-day meeting from October 5 to 7, with the central bank citing a changing inflation outlook and a challenging global economic environment. The move is expected to increase borrowing costs for households and businesses, while the RBI also shifted its policy stance to “calibrated tightening”.

RBI Governor Sanjay Malhotra said the decision reflected concerns that inflation and its outlook were no longer as favourable as they had been last year. He said headline consumer price inflation was expected to average around 5.8% over the next three quarters, while inflation for the full financial year was projected at 4.4%. The governor said the Indian economy continued to show resilience despite growing uncertainty in the global economy.

The RBI’s decision came amid higher global food and energy prices, financial market volatility and tighter financial conditions worldwide. Malhotra said global growth remained resilient but was expected to slow, while rising energy and food prices were contributing to renewed inflationary pressures. He also pointed to trade uncertainty, higher bond yields in advanced economies and an appreciating US dollar as factors that were keeping global markets under pressure.

Also Read: Delhi Police Tighten Security Before CJP Seeks March Nod

Inflation remained the central concern for the MPC as it assessed the need to change the policy rate. The central bank noted signs of elevated inflation expectations and broader price pressures, although it found limited evidence that supply-side pressures had become firmly embedded in companies’ pricing behaviour. The MPC also highlighted the risk that supply shocks could create second-round effects by influencing inflation expectations and business pricing decisions, while strong growth in monetary and credit aggregates was identified as another area to monitor.

The shift to a “calibrated tightening” stance also signals a change in the RBI’s approach to monetary policy. Malhotra said rate cuts were off the table in the near term, while future action could involve another rate increase or a pause depending on how inflation and growth develop. The central bank has therefore not committed to a series of further hikes, but has kept the possibility open if price pressures remain elevated.

Malhotra said the duration and extent of any rate-hike cycle would depend on actual economic developments and the outlook for inflation and growth. The RBI will particularly monitor underlying inflation, the broadening of price pressures, second-round effects from supply shocks and demand conditions. While the governor maintained that India’s economic momentum remained broad-based and resilient, the latest rate decision marks a significant shift after a prolonged period without a repo rate increase.

Also Read: Nobel Chemistry 2026: Royal Swedish Academy Announces Laureates Today in Stockholm