RBI raises the repo rate by 25 bps to 5.50% and changes its stance to calibrated tightening

Victoria Shinder07 October 2026, 07:332 min read

The Reserve Bank of India's Monetary Policy Committee raised the policy repo rate by 25 basis points to 5.50% on 7 October, at the end of its 63rd meeting held from 5 to 7 October. The vote on the rate was unanimous. The standing deposit facility rate is now 5.25%, and the marginal standing facility rate and Bank Rate 5.75%.

The stance. The MPC changed its stance to calibrated tightening. The resolution explains that this "only signals that given the current conditions, rate cuts are off the table in the near term and policy action ahead can only be a rate hike or a pause". Two members, Nagesh Kumar and Ram Singh, wanted to keep the stance neutral.

Projections.

• CPI inflation for 2026-27: 5.2%, with Q2 at 4.9%, Q3 at 6.0% and Q4 at 5.7%; Q1 2027-28 at 5.6%. Core inflation is projected at 4.4% for the year. Headline inflation is expected to average almost 5.8% over the next three quarters.
• Real GDP growth for 2026-27: 7.1%, with Q2 at 7.2%, Q3 at 6.9% and Q4 at 6.8%; Q1 2027-28 at 7.1%. Q1 2026-27 growth came in at 7.8%, above expectations.

What the MPC saw. CPI inflation rose to 4.8% in August from 4.5% in July, mainly from food and fuel, but core inflation also picked up to 4.2%, or 2.9% excluding precious metals. The share of CPI items with inflation above 4% rose to about 37%. The committee cites a deficient south-west monsoon, strong El Niño conditions and high energy prices after the re-escalation of the West Asia conflict. It found "some evidence of elevated inflation expectations and generalisation of inflation" but "only limited signs of supply side pressures getting embedded in pricing behaviour", and limited evidence of demand-side pressure, with risks from strong money and credit growth.

Global backdrop. The resolution notes that the US Federal Reserve raised rates by 25 basis points in September and that global bond yields are at record highs.

The minutes will be published on 21 October; the next meeting is scheduled for 2 to 4 December.