RBI hikes repo rate by 25 basis points to 5.5%
The Reserve Bank of India has increased the repo rate by 25 basis points to 5.5% to combat rising inflation. This decision follows increased economic pressure from the ongoing West Asia conflict and poor monsoon conditions.
Why it matters
Higher interest rates increase borrowing costs for businesses and consumers, which is intended to cool down inflation but may slow economic growth.
The Reserve Bank of India’s Monetary Policy Committee (MPC) on Wednesday (October 7, 2026) announced that its members unanimously decided to increase the repo rate by 25 basis points, from 5.25% to 5.50%.
The key rate hike after nearly three-and-a half years comes as inflation pressures rise due to the continuing West Asia conflict.
India joined major central banks in raising rates as higher oil prices, triggered by the Iran war, fuel inflation, squeeze purchasing power, and weigh on currencies. Weak monsoon rains linked to El Niño have compounded price pressures on the economy.
The six-member MPC voted unanimously in favour of the rate hike. The monetary policy stance was changed to “calibrated tightening” from “neutral”.
It is clear that the outlook for inflation is no longer benign, Governor Sanjay Malhotra said in his policy address.
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