RBI Raises Repo Rate by 25 bps to 5.5%, First Hike in Nearly 4 Years

The Reserve Bank of India’s Monetary Policy Committee (MPC) unanimously raised the repo rate by 25 basis points to 5.5% from 5.25% on Wednesday, marking the central bank’s first rate hike since February 2023. The six-member committee, chaired by RBI Governor Sanjay Malhotra, also changed its policy stance to “calibrated tightening.”

The decision comes against a backdrop of elevated oil prices, tighter global financial conditions, and risks to food inflation from unfavourable weather. “In light of the available data, it is clear that inflation and its outlook are not benign as they were last year,” Malhotra said, announcing the decision.

The RBI raised its FY27 CPI inflation forecast to 5.2%, alongside an upward revision to its GDP growth projection to 7.1% for the full year. Quarterly growth projections stand at 7.2% for Q2 FY27, 6.9% for Q3 and 6.8% for Q4.

The repo rate had remained unchanged at 5.25% for four consecutive policy meetings, following 125 basis points of cumulative rate cuts through 2025. Wednesday’s hike reverses that easing cycle, signalling the central bank’s intent to reinforce inflation credibility before price pressures become entrenched, even as it continues to project robust economic growth for the year ahead.