India's central bank raises its key rate to 5.50%, its first hike in years, and says cuts are off the table

The Reserve Bank of India (RBI) raised its policy repo rate by 25 basis points to 5.50% on Wednesday, 7 October, after a three-day meeting of its six-member Monetary Policy Committee chaired by Governor Sanjay Malhotra. The vote was unanimous. The standing deposit facility rate moves to 5.25%, and the marginal standing facility rate and the Bank Rate to 5.75%.

A new stance

The committee also changed its stance from “neutral” to “calibrated tightening”. According to the RBI’s statement, this signals that rate cuts are “off the table in the near term” and that the next move can only be a hike or a pause; how long and how far the hiking cycle goes will depend on growth and inflation, especially underlying inflation and second-round effects of the supply shock.

Why now

The Hindu described it as the first increase in nearly three and a half years. The repo rate had been at 5.25% since a cut in December 2025. The newspaper said inflation pressure has been rising because of the continuing conflict in West Asia and the resulting jump in oil prices, compounded by weak monsoon rains linked to El Niño. Malhotra said the outlook for inflation is no longer benign. The RBI now projects real GDP growth of 7.1% and CPI inflation of 5.2% for the 2026-27 fiscal year, The Hindu reported.