Business & Economy
RBI raises repo rate to 5.5%
Higher borrowing costs return as inflation risks outweigh further rate cuts
Higher borrowing costs return as inflation risks outweigh further rate cuts
Borrowers may soon pay more for floating-rate loans after the raised its from 5.25% to 5.5%, the first increase since February 2023. The move reverses an that had lowered rates as inflation appeared to cool. The RBI now sees prices rising faster, with food, fuel, weather disruptions and crude oil creating risks beyond temporary food shocks. 1
The decision came even as the RBI raised its growth forecast from 6.7% to 7.1%, suggesting the economy can withstand tighter policy. Higher rates can slow spending and investment, but may help prevent inflation from spreading. Home and business borrowers face higher EMIs, while savers may get better deposit returns. The new “” stance leaves open a pause or another hike, depending on prices, growth and future data. 4
The voted 4-2 to change its stance from to . The decision signalled that near-term rate cuts were no longer the base case, leaving a pause or another hike dependent on inflation expectations, growth, and incoming data. Floating-rate borrowers may face higher , while deposit rates and credit conditions could also adjust.
The MPC increased the repo rate by 25 basis points, from 5.25% to 5.5%, marking the . The RBI cited rising and potentially , including food, fuel and crude-price risks, while projecting inflation to remain elevated across coming quarters.
The RBI raised its to 7.1% from 6.7%, reflecting stronger economic activity. At the same time, it increased its to 5.2% from about 5.0%, showing that worsening price risks outweighed the case for further easing.
rose to 4.82% in August, remaining above the RBI’s 4% for a third consecutive month. Food and energy pressures, weather-related disruptions and higher increased the risk that inflation would spread beyond .
After cutting the repo rate to 5.25% in late 2025, the RBI kept it unchanged through its February, April, June and August 2026 while retaining a .
After holding the repo rate at 6.5% through multiple reviews, the changed its stance from to neutral. The shift signalled that future decisions could include rate cuts as policymakers weighed softer inflation against slowing activity.
The RBI raised the by 25 to 6.5%, completing the that began in 2022. This was the last repo-rate increase before October 2026. The long gap became the baseline for the later policy reversal.