The Monetary Policy Committee of the Reserve Bank of India (RBI MPC) hiked the repo rate by 25 bps, taking it to 5.50 per cent, RBI Governor Sanjay Malhotra said after the end of the three-day Monetary Policy Committee (MPC) meeting on Wednesday, October 7. This is the first increase in the repo rate since February 2023.

A repo rate hike was expected amid mounting inflation pressure and geopolitical concerns due to an energy supply chain crisis in the Middle East. Economists from many global and domestic banking and finance bodies have also voted in favour of a hike in repo rates.

The central bank last raised the repo rate by 25 basis points to 6.50 per cent in February 2023. Now, the bank has kept rates unchanged until 2023–24, before starting the rate-cut process in 2025.

The MPC changed its stance from 'neutral' to 'systematic tightening' and also stressed that a cut in interest rates in the near future is unlikely given the current situation. The governor said that the SDF rate stands adjusted at 5.25 per cent, and the marginal standing facility range and the bank rate are at 5.75 per cent. 

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Inflation And GDP Growth Predictions

The governor noted that a 7.8 per cent growth in real GDP for the first quarter of this fiscal year (Q1 FY26) showed that domestic economic activity exhibited resilience despite headwinds from higher crude prices and other global scenarios.

The retail inflation based on the Consumer Price Index (CPI) is projected at 5.2 per cent for this fiscal year. The projected inflation rates in respective quarters are 4.9 per cent in Q2, 6 per cent in Q3, and 5.7 per cent in Q4.

Meanwhile, the Real GDP growth projection for this fiscal year is 7.1 per cent. Quarterly GDP growth projections are Q2 at 7.2 per cent, Q3 at 6.9 per cent, and Q4 at 6.8 per cent.

Meanwhile, the RBI said that the Real GDP growth projection for Q1 next year is 7.1 per cent, while Inflation projected is at 5.6 per cent.

The October RBI MPC meeting took place against the backdrop of growing macroeconomic challenges, including the ongoing war in the Middle East and inflation shocks.


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