The Reserve Bank of India’s Monetary Policy Committee (MPC) has hiked repo rate by 25 basis points to 5.5 per cent.The Monetary Policy Committee unanimously decided in favour of the hike in policy interest rate, RBI Gove…

The Reserve Bank of India’s Monetary Policy Committee (MPC) has hiked repo rate by 25 basis points to 5.5 per cent.The Monetary Policy Committee unanimously decided in favour of the hike in policy interest rate, RBI Governor Sanjay Malhotra said on Wednesday.The central bank changed its policy stance from ‘neutral’ to ‘calibrated tightening’, signalling that it is no longer looking at rate cuts in the near term. Malhotra said the policy action ahead could only be a rate hike or a pause.The repo rate is the rate at which the RBI lends money to banks. When the repo rate rises, banks may face a higher cost of funds. This can lead to an increase in lending rates, including those linked to floating-rate home loans.This is the first repo rate hike initiated by the Central bank in more than three-and-a-half years. This comes in the backdrop of inflation staying above its medium-term target of 4% for a third straight month in August and heightened geopolitical tensions adding to pressure on the rupee.”In this global backdrop, the MPC met on the 5th, 6th and 7th of this month to deliberate and decide on the policy repo rate. 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 under the LAF by 25 basis points to 5.5 per cent. Consequently, the SDF rate stands adjusted at 5.25 per cent and the marginal standing facility rate and the bank rate to 5.75 per cent,” Malhotra said.”The MPC noted that the global context on account of geopolitical developments remains challenging. Nonetheless, the Indian economy has been strong and the economic momentum remains broad-based. Moreover, the economy is expected to remain resilient. It further observed, in light of the available data, that it is clear that inflation and its outlook are not as benign as they were last year. With headline CPI inflation expected to average almost 5.8% in the next three quarters, including this, and core inflation projected at 4.4 per cent for this financial year,” the RBI Governor said.RBI MPC meeting 2026: Key takeawaysEconomy has been strong, economic activity momentum remains broad-based, says RBI Governor Sanjay Malhotra.Indian economy is expected to remain resilient, he says.MPC changes stance to ‘calibrated tightening’ from ‘neutral’; underscores rate cut unlikely in near term given current conditions.Looking ahead, global economic uncertainty, supply chain disruptions may have some bearing on domestic economic activity. Weak monsoon along with strong El Nino may impact upcoming rabi season, says RBI Governor.RBI raises GDP growth forecast by 40 basis points to 7.1% for FY27. Price pressures increasingly becoming visible across a range of commodities, says Malhotra. RBI marginally raises inflation projection to 5.1% for FY27 from earlier forecast of 5%. Credit growth continues to be robust, broad-based, says RBI Governor.Net FDI registered sustained improvement at $13.8 billion in first four months of this fiscal compared to $9.6 billion year ago.RBI Governor says forex reserves continue to be healthy, adequate to provide import cover for 11 months.”We shall strive for price, as well as financial stability as both are essential for sustainable growth in long run,” says Malhotra.

Source: Deccan Herald