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RBI Raises Repo Rate to 5.5% as Inflation Risks Grow
India’s central bank has made borrowing money more expensive for banks.
It raised its main interest rate from 5.25% to 5.50% on October 7, 2026.
The committee that sets the rate unanimously agreed to the increase.
It also shifted its policy stance toward tighter monetary policy.
The bank is concerned that higher oil and other prices could make everyday goods more expensive.
A weaker rupee and poor monsoon conditions may add to those pressures.
The RBI said a rate cut is unlikely soon.
It may raise rates again or leave them unchanged.
Higher rates can eventually make some loans more expensive for households and businesses.
The Reserve Bank of India raised its repo rate by 25 basis points, from 5.25% to 5.50%, on October 7, 2026.
The Monetary Policy Committee unanimously approved the rate increase; reports say it changed the policy stance from neutral to calibrated tightening by majority, with one specifying a 4-2 vote.
The RBI cited inflation risks including higher oil and commodity prices, a weaker rupee, unfavourable monsoon conditions and tighter global financial conditions.
The RBI said a rate cut is unlikely in the near term; its next policy action could be another hike or a pause.
One report said the RBI raised its FY27 growth forecast to 7.1% from 6.7% and its inflation forecast to 5.2% from 5%.
- Who
- The Reserve Bank of India’s Monetary Policy Committee, chaired by Governor Sanjay Malhotra.
- What
- Raised the repo rate by 25 basis points to 5.50% and changed its policy stance to calibrated tightening.
- Where
- India.
- When
- Wednesday, October 7, 2026.
- Why
- To address increasing inflation risks amid higher oil and commodity prices, a weaker rupee, unfavourable monsoon conditions and tighter global financial conditions.
Key facts
- New repo rate
- 5.50%, up from 5.25%
- Rate increase
- 25 basis points
- MPC vote on rate
- Unanimous
- Policy stance
- Changed from neutral to calibrated tightening; reports describe a majority vote, with one specifying 4-2
- Other policy rates
- Standing deposit facility rate: 5.25%; marginal standing facility rate and bank rate: 5.75%
- August CPI inflation
- Reported at 4.82% in one article and 4.8% in others
- FY27 forecasts
- One report said the GDP growth forecast rose to 7.1% from 6.7%, while the inflation forecast rose to 5.2% from 5%
Quotes
Sanjay Malhotra
RBI Governor
“The RBI's October hike acknowledges that cyclical inflation risks are no longer benign. A change in stance also underscored the RBI MPC's hawkish intent. Against a backdrop of elevated oil prices, tighter global conditions, and risks to food inflation from unfavourable weather, policymakers have chosen to reinforce inflation credibility before risks become entrenched.”
livemint.com
financialexpress.com
“After a detailed assessment of the evolving macroeconomic and financial conditions, developments and the outlook, the MPC voted unanimously to increase the policy repo rate under the LAF by 25 basis points to 5.5 per cent.”
businesstoday.in
republicworld.com
Currency trader at a private-sector bank
Currency trader quoted by the news agency.
“A no-change decision would likely trigger heavy immediate pressure on the rupee and push forward premiums higher, while a 50-basis-point hike would provide a boost, though the impact would probably be short-lived.”
businesstoday.in
Sources
RBI MPC meeting October 2026: Repo rate hiked by 25 bps to 5.50%; growth, inflation forecast, other key takeaways
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