Prompted by mounting inflationary pressures from the prolonged West Asia crisis, the Reserve Bank of India has raised the benchmark repo rate by 25 basis points to 5.50%, marking its first hike in nearly three and a half years. The Monetary Policy Committee also shifted its policy stance to calibrated tightening while forecasting economic expansion for FY27 at 7.1%.
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LiveLive: RBI MPC raises repo rate by 25 bps to 5.50%; FY27 GDP growth seen at 7.1%
Prompted by mounting inflationary pressures from the prolonged West Asia crisis, the Reserve Bank of India has raised the benchmark repo rate by 25 basis points to 5.50%, marking its first hike in nearly three and a half years. The Monetary Policy Committee also shifted its policy stance to calibrated tightening while forecasting economic expansion for FY27 at 7.1%.
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RBI warns frothy AI asset valuations pose downside risk to global economy
The Reserve Bank of India has identified stretched valuations in artificial intelligence-linked assets among the primary threats facing the worldwide economic environment, along with geopolitical friction, tighter worldwide credit conditions, and elevated public debt piles. In its Monetary Policy Statement for 2026-27, the central bank observed that while the international economy has demonstrated resilience, the re-ignition of hostilities across West Asia and sharp swings in crude oil prices continue to fuel uncertainty. The central bank's warning regarding AI asset prices forms part of its overarching review of international financial vulnerabilities. It also stressed that an elusive diplomatic settlement in West Asia continues to cloud global prospects.Domestic equities maintain slide following RBI hike, rate-sensitive shares tumble
Indian equity benchmarks sustained morning losses across the board on Wednesday (October 7, 2026), with rate-sensitive counters leading the drop after the central bank pushed up borrowing costs by 25 basis points in response to war-driven inflationary head-winds that have pressured rate-setters globally. By 10:09 a.m. IST, the Nifty 50 was down 0.77% at 22,599.1, while the BSE Sensex slipped 0.65% to trade at 72,594.57. Prior to the MPC announcement, the two indices were already trading lower by around 0.75% and 0.7% respectively.India joins major economies delivering rate hikes amid crude oil pressures
India has aligned with other leading economies in tightening monetary policy as spiraling fuel costs sparked by the conflict in West Asia batter global currencies. The US Federal Reserve raised borrowing costs by a quarter percentage point in September, while US 10-year Treasury yields have hovered near 5.3%.Repo rate increased: What gets more expensive for borrowers?
Following a gap of nearly forty-two months, the Reserve Bank of India increased its key lending rate by 25 basis points to 5.5% to rein in price pressures aggravated by the lingering West Asia turmoil. Following the hike, loans for homes, automobiles, and business ventures will carry higher interest costs, pushing up monthly EMIs for existing debt holders.Will pursue both price and financial stability: RBI Governor
"We shall strive for price, as well as financial stability as both are essential for sustainable growth in long run," stated Sanjay Malhotra following the release of the MPC's decisions. He emphasized that the central bank will persistently roll out measures aimed at reinforcing economic resilience amid turbulent global conditions.Forex kitty remains strong, covers 11 months of imports: Sanjay Malhotra
The nation's foreign exchange holdings remain in solid shape, sufficient to finance imports for 11 months, Mr. Malhotra noted. He further indicated that the Balance of Payments is projected to post a robust surplus during the current financial year.Near-term inflation faces ongoing supply-side strain: RBI Governor
Mr. Malhotra pointed out that immediate projections suggest inflation will remain under persistent strain from the supply chain. He attributed these headwinds to a deficient southwest monsoon, El Nino weather patterns, and heightened volatility in overseas crude prices. He remarked during the address that upward price pressures are becoming increasingly apparent across several commodities.FY27 CPI inflation projected at 5.2%: RBI
CPI inflation for FY27 has now been pegged at 5.2%, announced Mr. Malhotra. "Food price increases have become more broad based, along with notable spikes in sugar and onion," he observed. The central bank has observed preliminary indicators that price pressures are turning generalized, he added.Rate tightening path and duration depend on actual growth and inflation: RBI Governor
RBI Governor Sanjay Malhotra stated that the scale and length of the rate-tightening trajectory will hinge on actual economic expansion, unfolding trends, and particularly the trajectory of core inflation, alongside the spreading of price pressures and secondary fallout from supply-side disruptions.Real GDP growth for FY27 estimated at 7.1%
Sanjay Malhotra announced that India's real GDP growth for FY27 is projected at 7.1%, marking an upward revision of 40 basis points. On Tuesday (October 6, 2026), the World Bank had similarly upgraded India's Gross Domestic Product (GDP) growth forecast for the ongoing financial year to 7.1%—up 0.5 percentage points from its April estimate—backed by stronger-than-anticipated performance in the first quarter.'Subsequent policy action restricted to rate hike or pause'
Announcing the outcomes of the RBI MPC review, Mr. Malhotra pointed out that upcoming monetary decisions can strictly involve either an increase in rates or a pause, considering the prevailing economic landscape. He added, "A comprehensive clarification of our approach was previously outlined in my April 2025 position." The policy rate verdict followed the conclusion of the Monetary Policy Committee's three-day deliberations.MPC shifts policy stance to calibrated tightening: Sanjay Malhotra
Reserve Bank Governor Sanjay Malhotra announced that the MPC has transitioned its monetary stance to "calibrated tightening." He further indicated that any possibility of rate reductions is completely ruled out for the immediate horizon.RBI MPC increases repo rate by 25 basis points to 5.50%
The Reserve Bank of India announced its bi-monthly policy review on Wednesday (October 7, 2026), reaching a unanimous verdict to raise the benchmark repo rate by 25 basis points from 5.25% to 5.50%. This primary rate adjustment, arriving after nearly three-and-a-half years, responds to mounting inflationary strains driven by the persistent conflict across West Asia. The benchmark rate was lowered to 5.25% back in December 2025 and had stayed unchanged until today's decision. Lalatendu Mishra
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