Pabitra Banerjee : The Reserve Bank of India has initiated its first interest rate hike in nearly four years, with the Monetary Policy Committee unanimously voting to elevate the key repo rate by 25 basis points to 5.50 percent amid mounting macroeconomic hurdles.
Announcing the crucial monetary policy outcome, RBI Governor Sanjay Malhotra confirmed that the central bank has simultaneously shifted its official policy stance from neutral to “calibrated tightening”. The decisive policy pivot comes driven by stubborn retail inflation prints climbing past tolerance targets, compounded by regional supply chain uncertainties, volatile global commodity and oil prices following geopolitical tensions in West Asia, and weather-related disruptions impacting the domestic agricultural outlook. Alongside the benchmark adjustment, the central bank revised its headline inflation projections upward to average 5.2 percent for the current financial year.
Reiterating that near-term interest rate cuts are completely off the table, Governor Malhotra cautioned that future policy adjustments will remain strictly contingent on incoming growth-inflation metrics. Consequent structural adjustments were also implemented across the liquidity corridor, with the Standing Deposit Facility rate adjusted to 5.25 percent and the Marginal Standing Facility rate raised to 5.75 percent.
Despite the tightening cycle pushing financing costs higher for commercial borrowers and retail consumers, the central bank concurrently revised India’s real GDP growth forecast upward to 7.1 percent for FY27, backed by resilient urban demand, robust banking credit flows, and continuous public sector infrastructure spending.
RBI announces repo rate hikes after 4 years
Governor Sanjay Malhotra announces unanimous MPC decision raising repo rate to 5.50%; inflation peg lifted to 5.2% while FY27 GDP growth forecast is revised upward to 7.1%.
