RBI raises repo rate by 25 points in first hike in four years, loan EMIs may rise

The MPC's three-day meeting, being held from October 5 to 7, comes after it kept the repo rate unchanged at 5.25 per cent in August.

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The Reserve Bank of India (RBI) raised its benchmark repo rate by 25 basis points to 5.5% on Wednesday, marking its first rate hike in nearly four years as inflationary pressures build despite resilient economic growth.

The six-member Monetary Policy Committee (MPC) unanimously voted to raise the policy rate and shifted its stance to “calibrated tightening” from “neutral”, signalling a greater focus on containing inflation.

RBI flags global risks, resilient domestic economy

Delivering the Monetary Policy Statement, RBI Governor Sanjay 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”.

Malhotra also flagged concerns over the inflation outlook, saying, “It is further observed, in light of the available data, that it is clear that inflation and its outlook are not 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% for this financial year.”

The MPC's three-day meeting, being held from October 5 to 7, comes after it kept the repo rate unchanged at 5.25 per cent in August and retained a neutral stance, citing the need for greater clarity on the inflation outlook and evolving growth-inflation dynamics.

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What is happening?

The last repo rate hike was in February 2023, when the RBI raised the rate by 25 basis points to 6.50 per cent. The central bank kept the rate unchanged through 2023-24 before beginning its rate-cut cycle in 2025.

The policy repo rate currently stands at 5.25 per cent.

A majority of participants in a PTI poll expected a 25-basis-point rate hike along with a hawkish tone at Wednesday’s policy review. However, opinions remain divided on whether the RBI will also change its policy stance.

Most experts said a rate increase was imminent, while some felt the central bank may hold off on a hike in the upcoming review.

The government has mandated the RBI to keep consumer price index (CPI)-based retail inflation at 4 per cent, with a tolerance band of 2 percentage points on either side.

Retail inflation accelerated to 4.82 per cent in August from 4.45 per cent in July.

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  Priyanjali Narayan is a journalist with Hindustan Times based in New Delhi. She has over two years of experience covering national and international affairs, reporting on breaking news, producing in-depth explainers, and writing feature stories. Her work explores the political, social, and cultural dimensions of major events, with a focus on providing clear, nuanced, and accessible journalism for a broad audience.Before joining Hindustan Times, she was part of the India Today newsroom, where she specialised in explanatory journalism. There, she wrote detailed analyses of major domestic and international issues and produced feature stories that included interviews with prominent public figures. The role strengthened her ability to combine speed with depth in a fast-paced news environment.She holds a Bachelor’s and a Master’s degree in History from the University of Delhi. Her academic training continues to shape her storytelling, grounding her work in historical context and research-driven insight.Outside the newsroom, she enjoys reading personal essays and fiction, and is often planning her next trip, always seeking stories that deepen her understanding of people and places.Read More