RBI hikes repo rate 25 bps to 5.50%, FY27 growth seen at 7.1%

The Reserve Bank of India (RBI) on Wednesday raised the repo rate by 25 basis points to 5.50% from 5.25%, as inflationary pressures continue to build amid the ongoing West Asia conflict.The decision was taken unanimously by the six-member Monetary Policy Committee (MPC) after its three-day meeting. With the latest hike, the RBI has shifted its policy stance to “calibrated tightening” from “neutral”.

#WATCH | RBI hikes policy repo rate by 25 basis point to 5.5% https://t.co/92jeQuC3wz

— ANI (@ANI) October 7, 2026

RBI Governor Sanjay Malhotra said the policy action ahead could only be a rate hike or a pause, given the evolving economic conditions. He added that a rate cut was “off the table in the near term”.The RBI last raised the repo rate in February 2023, by 25 basis points to 6.50%. The rate was subsequently cut to 5.25% in December 2025 and kept unchanged until Wednesday’s decision.
The RBI has projected real GDP growth for FY27 at 7.1%, revising it upwards by 40 basis points. Meanwhile, CPI inflation for FY27 is now projected at 5.2%.Malhotra said the near-term inflation outlook points to continued supply-side pressures due to a deficient southwest monsoon, El Niño conditions and high volatility in international oil prices.“Food price increases have become more broad based, along with notable spikes in sugar and onion,” he said, adding that the RBI has seen early signs of inflation becoming generalised.

VIDEO | RBI MPC Meeting: Governor Sanjay Malhotra says, "RBI raises GDP growth forecast by 40 basis points to 7.1 per cent for FY27." (Source: Third Party) (Full video available on PTI Videos - https://t.co/d8jp61yd2p) https://t.co/hFNEMcFNev

— Press Trust of India (@PTI_News) October 7, 2026

The Governor said the extent and duration of the rate hike cycle would depend on actual growth, inflation developments and the outlook for underlying inflation.On the external sector, Malhotra said India’s forex reserves remain healthy and adequate to provide import cover for 11 months. He added that the balance of payments is expected to record a healthy surplus this year.

(Business Correspondent)