RBI raises the repo rate to 5.50% and turns to 'calibrated tightening'. The rupee still slides to 96.78 and the Sensex sheds 429 points
It is the first hike since February 2023. The Governor said the next move is a hike or a pause, not a cut. The RBI now sees inflation at 5.2 per cent this year and growth at 7.1 per cent.
The Monetary Policy Committee raised the repo rate by 25 basis points to 5.50 per cent on Wednesday and changed its stance from neutral to calibrated tightening. It is the first increase since February 2023, ending a pause at 5.25 per cent that had lasted through four reviews. Governor Sanjay Malhotra told reporters the central bank would be either raising or pausing from here, and ruled out a cut in the near term. The RBI raised its forecast for consumer price (CPI) inflation in 2026-27 to 5.2 per cent from 5.0, with the third quarter expected to peak at 6 per cent, citing a deficient monsoon, El Niño, and costly energy and commodities. It raised its growth forecast to 7.1 per cent from 6.7, after the economy grew 7.8 per cent in April–June. One outlet describes the vote as unanimous; we have not seen it confirmed elsewhere.
Markets took it badly. The Sensex fell 429.11 points, or 0.59 per cent, to 72,638.70 and the Nifty lost 0.76 per cent to 22,603.05, after a two-day rise. The rupee settled at 96.78 per dollar by Business Standard's count (PTI had 96.75), its weakest close since 20 May and within about 0.2 per cent of the record low of 96.97. Bloomberg reports the RBI's reserves fell $51 billion in the four weeks to 2 October as it defended the currency. The Indian Express says home-loan EMIs will rise; The Hindu argues that the heavy lifting on inflation now falls to the government.