RBI Raises Repo Rate to 5.5% as Inflation Risks Rise

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. The central bank also shifted its policy stance from “neutral” to “calibrated tightening”, signalling that further increases could be considered depending on inflation and economic growth.

The RBI raised its inflation forecast for the current financial year to 5.2% from 5%, citing rising oil and food prices and broader price pressures. Governor Sanjay Malhotra said inflation risks were no longer as favourable as last year, while the central bank expects consumer inflation to average nearly 5.8% over the next three quarters.

At the same time, the RBI upgraded its GDP growth forecast to 7.1% from 6.7%, supported by resilient economic activity. Analysts remain divided on the scale of further rate hikes, with the future path expected to depend on oil prices, the West Asia conflict, food inflation and broader global economic conditions.

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