The Reserve Bank of India raised its key lending rate by 25 basis points to 5.50% on October 7, its first increase in this cycle, as inflation pressures from food, fuel and global oil markets mounted.

The six-member Monetary Policy Committee, chaired by Governor Sanjay Malhotra, voted unanimously for the hike. The standing deposit facility rate rose to 5.25%, and the marginal standing facility rate and bank rate to 5.75%. The committee changed its stance from neutral to "calibrated tightening", although two members, Nagesh Kumar and Ram Singh, preferred to keep it neutral.

The numbers

  • Inflation: consumer inflation rose to 4.8% in August from 4.5% in July. The RBI now projects 5.2% for 2026-27, with 6.0% in the October–December quarter.
  • Growth: real GDP growth is projected at 7.1% for 2026-27, supported by private consumption, investment and exports.
  • Risks: geopolitical tensions, crude-oil volatility, a deficient monsoon, El Niño and tighter global financial conditions.

The committee said headline inflation is expected to average close to 5.8% over the next three quarters, making a recalibration of policy "imperative". The minutes are due on October 21 and the next meeting is scheduled for December 2–4.