The Reserve Bank of India hiked its interest rates for the first time in over 3 years on Wednesday (October 7) by 25 basis points to 5.50 per cent. RBI took the measure as rising inflation risks, rising global yields and resilient domestic growth made the case for tighter monetary policy. The Monetary Policy Committee's move marks a shift from its August policy, when the repo rate was held at 5.25 per cent, and a neutral stance was retained while waiting for greater clarity on the inflation outlook and growth-inflation balance. In his statement, RBI Governor Sanjay Malhotra said, “After a detailed assessment of the evolving macroeconomic and financial conditions, developments and the outlook, the MPC voted unanimously to increase the policy repo rate by 25 basis points.” With the hike, the standing deposit facility (SDF) rate is now 5.25 per cent, while the marginal standing facility (MSF) rate and the Bank Rate stand at 5.75 per cent. The MPC also changed its stance to calibrated tightening, by a majority vote.&nbsp;Also read: <a href="https://www.wionews.com/world/who-breaks-silence-on-possible-pneumonic-plague-in-russia-seeks-clarity-on-second-reported-death-1791344075932">WHO breaks silence on possible pneumonic plague in Russia, seeks clarity on second reported death</a><h3>Inflation expected nearly 5.9 per cent in third quarter</h3>The decision comes amid escalating price pressures as India's CPI inflation reached &nbsp;4.82 per cent in August. Economists and research reports have forecasted that inflation will likely go to 5 per cent during FY27. Inflation is expected to peak nearly 5.9 per cent in the third quarter, with deficient monsoon conditions and crude oil prices around USD 100 a barrel adding to the risks.&nbsp;Global financial conditions have also become less supportive. The US Federal Reserve raised its policy rate by 25 basis points in September, while US 10-year Treasury yields have remained elevated at around 5.3 per cent. The rupee was trading at 96.36 per US dollar at the time of filing this report.&nbsp;Liquidity was evaluated as another key consideration. The RBI's special forex swap facility mobilised USD 132.98 billion through FCNR(B) deposits as of August 31, adding substantial liquidity to the banking system and increasing the need for calibrated absorption.&nbsp;The RBI's decision also comes against resilient domestic activity. India's economy grew 7.8 per cent in Q1 FY27, while high-frequency indicators have pointed to continued strength in domestic demand, manufacturing and services.The latest move is expected to set the direction for monetary policy in the coming months, with economists earlier seeing scope for cumulative tightening of up to 75 basis points and the repo rate potentially reaching around 6 per cent by the end of FY27, depending on inflation, oil prices and global financial conditions.&nbsp;

With the hike, the standing deposit facility (SDF) rate is now 5.25 per cent, while the marginal standing facility (MSF) rate and the Bank Rate stand at 5.75 per cent. The MPC also changed its stance to calibrated tightening by a majority vote.

The Reserve Bank of India hiked its interest rates for the first time in over 3 years on Wednesday (October 7) by 25 basis points to 5.50 per cent. RBI took the measure as rising inflation risks, rising global yields and resilient domestic growth made the case for tighter monetary policy. The Monetary Policy Committee's move marks a shift from its August policy, when the repo rate was held at 5.25 per cent, and a neutral stance was retained while waiting for greater clarity on the inflation outlook and growth-inflation balance. In his statement, RBI Governor Sanjay Malhotra said, “After a detailed assessment of the evolving macroeconomic and financial conditions, developments and the outlook, the MPC voted unanimously to increase the policy repo rate by 25 basis points.” With the hike, the standing deposit facility (SDF) rate is now 5.25 per cent, while the marginal standing facility (MSF) rate and the Bank Rate stand at 5.75 per cent. The MPC also changed its stance to calibrated tightening, by a majority vote. Also read: WHO breaks silence on possible pneumonic plague in Russia, seeks clarity on second reported death Inflation expected nearly 5.9 per cent in third quarter The decision comes amid escalating price pressures as India's CPI inflation reached 4.82 per cent in August. Economists and research reports have forecasted that inflation will likely go to 5 per cent during FY27. Inflation is expected to peak nearly 5.9 per cent in the third quarter, with deficient monsoon conditions and crude oil prices around USD 100 a barrel adding to the risks. Global financial conditions have also become less supportive. The US Federal Reserve raised its policy rate by 25 basis points in September, while US 10-year Treasury yields have remained elevated at around 5.3 per cent. The rupee was trading at 96.36 per US dollar at the time of filing this report. Liquidity was evaluated as another key consideration. The RBI's special forex swap facility mobilised USD 132.98 billion through FCNR(B) deposits as of August 31, adding substantial liquidity to the banking system and increasing the need for calibrated absorption. The RBI's decision also comes against resilient domestic activity. India's economy grew 7.8 per cent in Q1 FY27, while high-frequency indicators have pointed to continued strength in domestic demand, manufacturing and services. The latest move is expected to set the direction for monetary policy in the coming months, with economists earlier seeing scope for cumulative tightening of up to 75 basis points and the repo rate potentially reaching around 6 per cent by the end of FY27, depending on inflation, oil prices and global financial conditions.

With the hike, the standing deposit facility (SDF) rate is now 5.25 per cent, while the marginal standing facility (MSF) rate and the Bank Rate stand at 5.75 per cent. The MPC also changed its stance to calibrated tightening by a majority vote.

RBI raises repo rate by 25 bps to 5.50%, first hike in over 3 years after inflation risks strengthen

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RBI raises repo rate by 25 bps to 5.50%, first hike in over 3 years after inflation risks strengthen