Industry Odisha Bureau, Oct 07: The Reserve Bank of India (RBI) has raised its benchmark repo rate by 25 basis points to 5.50%. This marks its first increase in nearly four years as the central bank responds to renewed inflation risks and a difficult global economic environment.
The decision was taken unanimously by the Monetary Policy Committee (MPC) after its October 5-7 meeting. The RBI has also shifted its policy stance from its previous position to “calibrated tightening.” This indicates that the interest rate cuts are unlikely in the immediate future.
RBI Governor Sanjay Malhotra said the infraction outlook had become less favourable compared with the previous year. Headline consumer price inflation is expected to average around 5.8 percent over the next three quarters. Meanwhile, the projection for the full financial year stands at 4.4%
The central bank cited higher global food and energy prices, volatile financial markets, tighter international financial conditions and geopolitical uncertainty among the key risks to the outlook. Rising bond yields in advanced economies and a stronger US dollar are also adding pressure to global markets.
Despite these challenges, Malhotra said India’s economic activity remained broad based and resilient.
The MPC also raised concerns over elevated inflation expectations and signs of wider price pressures. While demand-side pressures remain limited, the RBI said supply shocks could influence expectations and corporate pricing decisions.
Malhotra also said future policy decisions would depend on incoming data. The RBI could either raise rates further or pause, depending on developments in inflation and growth.
