New Delhi, Oct 2026 : The Reserve Bank of India’s (RBI) six-member Monetary Policy Committee (MPC), chaired by Governor Sanjay Malhotra, on Wednesday raised the key policy repo rate by 25 basis points to 5.50 per cent, citing mounting global and domestic inflationary pressures.
Following a three-day review meeting, the RBI also adjusted the Standing Deposit Facility (SDF) rate to 5.25 per cent, while the Marginal Standing Facility (MSF) rate and bank rate were raised to 5.75 per cent.
The rate increase marks the first hike after the repo rate had remained unchanged at 5.25 per cent for an extended period. The decision came against a challenging global economic backdrop, with crude oil prices rising above $100 a barrel amid the continuing West Asia crisis.
Governor Malhotra said global inflation was projected to increase sharply, prompting major central banks to reassess their monetary policy stance and move towards tighter financial conditions.
The MPC’s decision followed growing concerns over the trajectory of domestic inflation as well as changing global macroeconomic conditions. Economists had largely anticipated a 25-basis-point increase, which would mark the first RBI repo rate hike since February 2023.
Consumer Price Index (CPI)-based retail inflation rose to 4.82 per cent in August, compared with 4.45 per cent in July, adding to concerns over the persistence of price pressures.
The RBI’s latest decision also comes at a time when higher international crude prices are increasing risks to India’s inflation outlook. A sustained rise in oil prices could affect transportation, manufacturing and other input costs, while also putting pressure on the country’s external balances.
SBI Research had earlier said that the balance of risks had shifted decisively in favour of a 25-basis-point rate increase. It pointed to broadening inflationary pressures, worsening global macroeconomic conditions, evolving liquidity conditions and renewed repricing of risks in international markets.
“It would be prudent for us to act pre-emptively rather than be behind the curve,” SBI Research economists said.
The domestic inflation outlook is also being influenced by weather-related risks. Strong El Nino conditions and below-normal rainfall expected in October could affect agricultural production and create additional pressure on food prices, particularly with the Rabi sowing season approaching.
The rise in global bond yields has further complicated the RBI’s policy choices. Higher yields in international markets, combined with elevated crude oil prices and domestic inflation, have reduced the central bank’s room to maintain an unchanged policy rate.
The latest increase is therefore being viewed as a pre-emptive move aimed at containing inflation expectations while maintaining financial stability amid heightened global uncertainty.
With inflation moving closer to the 5 per cent mark and external risks continuing to evolve, economists expect the RBI to remain cautious in its upcoming policy reviews. The central bank’s future decisions are likely to depend on the trajectory of inflation, crude oil prices, domestic growth and global financial conditions.
The MPC’s latest action signals a shift towards tighter monetary conditions after a prolonged period of policy stability.
(Disclaimer :The content of this article is sourced from a news agency and has not been edited by the Mavericknews30 team.)
