Policy repo rate raised 25 basis points to 5.50 percent
The Reserve Bank of India has raised its policy repo rate by 25 basis points to 5.50 percent. The Monetary Policy Committee voted unanimously for the increase at its October meeting while shifting its stance to calibrated tightening.
Unanimous increase across the corridor
The Monetary Policy Committee voted unanimously under Governor Sanjay Malhotra to raise the policy repo rate under the liquidity adjustment facility to 5.50 percent.
Consequently, the standing deposit facility rate adjusted to 5.25 percent, while the marginal standing facility rate and the Bank Rate rose to 5.75 percent.
The decision was backed by all six members: Malhotra, Nagesh Kumar, Saugata Bhattacharya, Ram Singh, Poonam Gupta and Indranil Bhattacharyya.
The committee cited persistent inflation risks driven by higher crude oil prices from the West Asia conflict, deficient monsoon conditions and ongoing El Niño effects that threaten food supplies.
Divergence on stance as inflation path steepens
Alongside the rate increase, the MPC altered its stance to calibrated tightening, taking near-term rate cuts off the table.
Two members, Kumar and Singh, opposed the stance change and preferred a neutral posture.
The central bank raised its consumer price inflation projection for 2026-27 to 5.2 percent, projecting headline inflation to peak at 6.0 percent in the third quarter before easing to 5.7 percent in the fourth quarter.
Meanwhile, real GDP growth for 2026-27 is projected at 7.1 percent.
Preemptive tightening amid fragile consensus
The MPC decisively shuts the door on rate cuts by adopting calibrated tightening.
Hiking against weather-driven food pressures carries growth risks, but broadening inflation left policymakers little choice.
The credibility of this move now hinges on preventing supply shocks from contaminating core pricing behavior.