India’s central bank raises repo rate to 5.50% in first increase since 2023

India joined the list of large economies raising interest rates on 7 October 2026, when the Reserve Bank of India (RBI) lifted its policy repo rate by a quarter of a percentage point to 5.50%. The six-member Monetary Policy Committee, chaired by Governor Sanjay Malhotra, voted unanimously for the increase at the end of a three-day meeting.

The repo rate is the rate at which the RBI lends to commercial banks. The news site Swarajya reported that it was the first increase since February 2023 and followed cuts totalling 125 basis points during 2025.

The committee’s resolution said consumer price inflation had risen to 4.8% in August from 4.5% in July, driven mainly by food and fuel but with core inflation also picking up. It projected inflation of 5.2% for the financial year ending in March 2027, peaking at 6.0% in the October-December quarter. “Inflation and its outlook are not benign as they were last year,” the committee said. “In this milieu, recalibrating the policy rate is imperative.”

Among the pressures it listed were a deficient south-west monsoon, strong El Niño conditions, and high energy and commodity prices linked to what it called the re-escalation of the conflict in West Asia. It also pointed abroad, noting that the US Federal Reserve had raised rates in September and that tightening by major central banks had reinforced expectations of higher global rates.

Growth was not the concern. The committee projected real GDP growth of 7.1% for the financial year, after a stronger than expected 7.8% in the April-June quarter.

The committee also changed its policy stance to “calibrated tightening”, although two members, Nagesh Kumar and Ram Singh, wanted to keep it neutral. The resolution said the new stance “only signals” that “rate cuts are off the table in the near term and policy action ahead can only be a rate hike or a pause”.