RBI Battles Inflation: Repo Rate Hiked to 5.50% Amid Shift to Calibrated Tightening

The Reserve Bank of India’s Monetary Policy Committee (MPC) raised the repo rate by 25 basis points to 5.50% on Wednesday. This decision marks the central bank’s first interest rate increase since February 2023, signaling an aggressive turnaround to curb broadening inflationary pressures.

Led by Governor Sanjay Malhotra, the six-member committee voted unanimously to implement the rate hike, effective immediately.

Accompanying the rate adjustment, the MPC officially shifted its policy stance to "calibrated tightening" from neutral. This move firmly signals that near-term rate cuts are completely off the table.

The hawkish tilt comes as India’s retail inflation crept up to 4.82% in August, fueled by persistent supply chain bottlenecks, rising food costs, and volatile global crude oil prices. Consequently, the RBI revised its FY27 CPI inflation projection upward to 5.2%.

Despite tighter conditions, the RBI expressed strong confidence in domestic macroeconomic resilience, aggressively raising the country's FY27 real GDP growth forecast to 7.1% from 6.7%.

While savers stand to benefit from higher fixed deposit returns, retail borrowers will face an immediate sting as home, auto, and personal loan EMIs scale upward.

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